IMPORTANT POINT
The court established that the failure to provide a forensic audit report and a personal hearing before declaring wilful defaulters violates natural justice principles.

ORDER :

1. Heard Mr S.Rajagopalan, learned counsel appearing on behalf of the petitioners and Mr V.V.S.N.Raju, learned standing counsel appearing on behalf of the respondents.

2. The petitioners approached the Court seeking payer as under:

“to issue any writ or order or direction more particularly one in the nature of writ of Certiorari and call for the Records pertaining to Declaration of petitioners herein as wilful defaultee by Wilful Defaulter Identification Committee vide order No. WDC/25/(FR22)/RIL, dated 12.08.2021 and consequential order of the Wilful Defaulter Review Committee vide order No. WDRC/19/(FY2021-2022)/RIL, dated 08.11.2021.”

3. The case of the petitioners as per the averments made by the petitioners in the affidavit filed by the petitioners in support of the present writ petition is as under:

(a) The 1st and 2nd Petitioner herein are suspended promoters of Rajvir Industries Limited, a company incorporated under companies act and having Corporate Identification No. L17116TG2004PLC044053 and the Respondent No. 1 had classified the account of Rajvir Industries Limited as a Non-Performing Account on 29.06.2014.

(b) Thereafter, the State Bank of India in the month of September 2019, had filed an application for initiation of Corporate Insolvency Resolution Process (CIRP) of Rajvir Industries Limited with C.P. (IB) No 747/7/HDB/2019. Aggrieved by the same, the Petitioner had challenged the said application on the grounds that the Default date i.e. 29.06.2014 is more than 3 years prior to filing of CIRP application and further by virtue of Section 18 of limitation act the said application for initiation of CIRP is liable to be dismissed.

(c) The Respondent had issued a Show Cause notice dated 18.05.2020 wherein it was cited that the Wilful Defaulter Identification Committee had examined the conduct of the account and utilization of credit facilities and had concluded that the acts/events of willful default are as follows:

(i) The unit has defaulted in meeting its payment obligations to the lender and has not utilized the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes.

(ii) Routing of Funds through any bank other than the lender bank or members of the consortium without the permission of the lender.

As per the Forensic Audit report of Chaturvedi & Co. the company was maintaining current accounts with Standard chartered bank (SCB) and Corporation Bank respectively during the Financial Year 2017-2018 and 2018-2019 without the permission of the lender banks. Hence it is evident that the company did not route the entire sale proceeds with the lender banks, instead, the funds were routed through banks other than the lender banks without prior permission of the lenders.”

(d) Thereafter, the 1st Petitioner herein had replied to the said notice vide his reply dated 02.06.2020 on behalf of Rajvir Industries Limited as well as the promoter/ guarantors who are the petitioners herein denying the allegations made by Respondent Bank and in the said letter the Petitioners also highlighted the fact that they are not in possession of Forensic Audit report relied upon by the Respondent bank and requested the Forensic Audit report to be shared with petitioners. The 1st Petitioner has also requested State Bank of India vide letter dated 27.11.2019 to provide petitioners the copy of the forensic audit report, but State Bank of India through vide their letter dated 29.11.2019 had declined the same.

(e) The Respondent through vide their letter dated 04.02.2021, informed the petitioners that they have been declared as wilful defaulters by the Willful Defaulter Identification committee and vide the said letter the Petitioners came to be aware that there was a paper publication dated 04.04.2020 issuing show cause notice to the Petitioners. Hence, petitioners submits that the Willful Defaulter Identification Committee of State Bank of India had unilaterally and arbitraril