The court clarified that the moratorium under the Insolvency Code does not prevent proceedings for declaring a borrower as a willful defaulter under RBI guidelines, emphasizing adherence to principles of natural justice.

JUDGMENT :

(Sunita Agarwal, J.)

1. The present appeal is directed against the order of the learned Single Judge dated 27.03.2023 whereby the writ petition challenging the order dated 12.05.2022 passed by the Willful Defaulter Identification Committee (WDIC) and the order dated 30.08.2022 passed by the Willful Defaulter Review Committee (WDRC) as also the impugned communication dated 16.05.2022 declaring the appellant as ‘Willful Defaulter’, has been dismissed.

2. Certain relevant facts of the case noted by the learned Single Judge are to be recorded herein. The respondent - IDBI Bank Limited is a part of consortium of the banks being Canara Bank, Bank of Baroda, E-Dena Bank, Andhra Bank (now Union Bank of India) and IDBI Bank. The consortium of the banks is led by Canara Bank. The appellant was the Director of the company, namely Surya Exim Limited (SEL), the account of which turned into a Non-Performing Asset (NPA) in the books of various consortium member banks, including the respondent bank. Such account of the appellant was declared as NPA by the consortium members in the month of August, 2019. The account of SEL (Company) was red-flagged on 09.10.2019 and an internal investigation was carried out by Canara Bank and the report dated 13.02.2020 was made by the consortium. The Forensic Auditor was appointed by Canara Bank to carry out a forensic audit of the account of SEL. It is an admitted fact of the matter and on the record that the Forensic Auditor (SKVM & Co.) appointed by Canara Bank, vide email dated 14.02.2020, sought clarification from the appellant in the form of a questionnaire, which is stated to have been replied by the appellant through his company (SEL). Further queries were made by the Forensic Auditor vide letter dated 14.05.2020. It is stated by the appellant that, on 08.07.2020, it came to the knowledge of the appellant that without waiting for his reply on the clarification, the Forensic Audit Report was submitted on 08.07.2020, though the reply was submitted by the appellant on 13.07.2020. It is contended that the appellant was kept in dark regarding the Forensic Audit Report dated 08.07.2020 as it was never supplied to the appellant. The Forensic Audit Report, however, is filed before this Court under the order passed by the writ Court.

3. It is then contended that unaware of the Forensic Audit Report, the appellant had replied the clarifications sought by the Forensic Auditor vide letter dated 14.05.2020, through the communication dated 13.07.2020. On 18.01.2021, the appellant wrote a letter asking for all documents including the Forensic Audit Report, declaring the appellant’s company’s account as a fraud account. No reply, however, was given. The appellant had, thus, no option but to approach this Court and a writ petition, namely Special Civil Application No.2233 of 2021 was filed wherein interim order dated 05.02.2021 was granted in favour of the appellant. A show cause notice dated 28.05.2021 was issued to the appellant under the Master Circular on Willful Defaulters, but no documents were provided along with the show cause notice. It is contended by the learned counsel for the appel