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2022 Supreme(Guj) 1435
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Bhargav D. Karia, J.
Satyakam Basu – Petitioner
Versus
State Bank of India – Respondent
R/Special Civil Application No. 4895 of 2021
Decided On : 21-12-2022
Advocate Appeared:
For the Petitioner: Tirth Nayak
For the Respondent: Ms Mohini Bhavsar For Mr Mr Bharat Jani
Headnote:
Constitution of India, 1950 - Article 226, 14 and 19(1)(g) - Companies Act, 1956 - Section 433, 434 - Willful Defaulter - Violation of principles of natural justice - Challenged order whereby petitioners were informed that Willful Defaulter Identification Committee of respondent bank in its meeting has declared petitioners as “Willful Defaulters” and Willful Defaulters Review Committee of respondent has confirmed decision to declare petitioners as “Willful Defaulters” and has further informed petitioners to report their names to all Credit Information Companies and/or RBI – Held, It is apparent that respondent bank has failed to comply with mechanism provided under Revised Master Circular and though notice was issued by respondent bank to which petitioners filed detailed reply but order passed by Review Committee confirming petitioners as willful defaulters was never provided to petitioners - Respondent bank while declaring petitioners as willful defaulter has violated provisions contained in Revised Master Circular and has also acted in violation of principles of natural justice - As impugned action which is penal in nature has been taken causing serious implication to petitioners without following basis of principles of natural justice, impugned action of respondent bank identifying account of petitioners as willful default and subsequent reporting of name of petitioners to RBI/CIBIL as willful defaulters are liable to be quashed and set aside - Petition allowed.
JUDGMENT :
1. Heard learned advocate Mr. Tirth Nayak for the petitioners and learned advocate Ms. Mohini Bhavsar for learned advocate Mr. Bharat Jani for the respondent.
2. Rule returnable forthwith. Learned advocate Ms. Mohini Bhavsar waives service of notice of rule on behalf of respondent.
3. By this petition under Article 226 of the Constitution of India, the petitioners have challenged the order dated 15.02.2021 passed by respondent – State Bank of India, whereby the petitioners were informed that Willful Defaulter Identification Committee of respondent bank in its meeting dated 28.08.2020 has declared the petitioners as “Willful Defaulters” and the Willful Defaulters Review Committee of respondent - bank has confirmed the decision of Willful Defaulter Committee to declare the petitioners as “Willful Defaulters” and has further informed the petitioners to report their names to all Credit Information Companies and/or RBI.
4. Brief facts of the case are as under :
4.1) The petitioners were Directors in Samshi Pipe Industries Limited (For short “SPIL”) which is a company incorporated under the Companies Act, 1956.
4.2) SPIL was in the business of manufacturing spiral welded pipes and had availed various credit facilities from Canara bank, State Bank of India and IDBI bank. The respondent bank had sanctioned credit facilities aggregating to Rs.30 crores to SPIL wherein the petitioners were the Directors. The petitioner company has also availed credit facilities from other lenders, details of outstanding from the respective lenders including the respondent bank is as under :
| Bank Name | Total outstanding (In crores approx) | % of outstanding debt (approx) |
| Canara Bank | 32 | 49% |
| SBI Bank | 23 | 36% |
| IDBI Bank | 10 | 15% |
| Total | 65 | 100% |
4.3) The respondent bank contributes only 36% of the outstanding credit facilities of the SPIL.
4.4) There were certain defaults in repayment of the said outstanding credit facilities and therefore, the account of SPIL was declared as Non-Performing Asset(NPA) with effect from 28.02.2008.
4.5) The respondent issued show cause notice dated 26.08.2016 to the petitioners to show cause why the name of the petitioner company should not be included in the list of Willful Defaulters as per the RBI Master circular dated 1.07.2015.
4.6) Petitioners replied to the show cause notice vide letter dated 12.09.2016 giving detailed and specific reasons to the allegations levelled against the petitioners.
4.7) One Company Petition No. 10/2016 was filed against SPIL under section 433 read with section 434 of the Companies Act, 1956 wherein this Court vide order dated 7.04.2016 admitted the petition and appointed provisional Liquidator to take charge of assets of SPIL.
4.8) On 18.08.2020, the petitioners received an e-mail dated 7.08.2020 referring to the show cause notice dated 12.09.2016 and calling upon the petitioners to remain present for personal hearing at its office.
4.9) The petitioners addressed an e-mail dated 26.08.2020 to the respondent informing that due to the travel restrictions imposed due to Covid pandemic, the petitioners will be unable to travel and requested for another date. Petitioners also orally requested the respondent to permit the petitioners to present their case through video conferencing.
4.10) It is the case of the petitioners that the respondent neither replied to the said e-mail nor responded to the request of the petitioners and proceeded with the hearing on 28.08.2020. The Identification Committee of the respondent bank without hearing the petitioners concluded that events of willful default have occurred and passed the order dated 28.08.2020 declaring the petitioners as willful defaulters.
4.11) The petitioners were informed about the order dated 28.08.2020 passed by the respondent vide letter dated 14.09.2020.
4.12) On receiving such letter, the petitioners immediately
