Court found that the classification as willful defaulters complied with RBI guidelines, with no violation of procedural rights or natural justice principles, thus dismissing the writ petition.

ORDER :

NAGESH BHEEMAPAKA, J.

Petitioners state that Respondent No.1, a public sector bank forming part of a consortium of lenders to Respondent No.2 company, has unjustly and unlawfully classified both the Petitioners and Respondent No.2 as willful defaulters in violation of the RBI Master Circulars on willful default. It is stated, Respondent No.2 company was engaged in the manufacture of hybrid seeds, an activity heavily dependent on climatic conditions. The unprecedented drought of 2012-13 severely affected agricultural output across multiple States, resulting in crop failure and causing severe disruption to the company's seed production, revenues and liquidity. They assert that this natural calamity was the primary cause of financial distress, leading to temporary inability to service loan obligations, and that there was no deliberate or intentional default on their part. It is also stated, during this critical period, the consortium banks, including Respondent No.1, failed to release sanctioned working capital, failed to disburse the approved Pre-CDR Priority Debt, delayed approval of CDR package, delayed execution of Master Restructuring Agreement, and made only partial disbursement of funds. They also allege that lenders failed to release the required Rs.15 crores for seed packing operations during 2013 and 2014, thereby causing inability to place stock in time, leading to sales returns, inventory accumulation, operational delays, and severe liquidity strain.

1.2. It is their case that the company had consistently serviced loan obligations prior to drought; they made several representations to government officials, consortium members, and JLM; and that letters and communications were issued requesting financial assistance. They contend that their distress was genuine, documented and acknowledged by the lenders on various occasions. Petitioners assert that willful default proceedings of Respondent No.1 suffer from fundamental procedural defects. It is contended that show cause notice dated 20.08.2016 was issued without supplying essential documents, including the forensic audit report, thereby depriving them of an effective opportunity to reply. They state that they nevertheless filed a detailed reply on 20.09.2016. They further contend that the notice dated 12.03.2018 fixing a personal hearing on 26.03.2018 was issued without furnishing full material, and that the order classifying them as willful defaulters was passed on the very same day as the hearing, indicating that the personal hearing was a mere formality without genuine consideration.

1.3. Petitioners state that orders of both the Identification Committee and the Review Committee were received only on 25.03.2019 and that those orders do not constitute reasoned orders. They allege that Review Committee also passed its order without affording them an opportunity to appeal or make a representation. They contend that the orders are mechanical, lacking any analytical consideration of their replies, and merely reiterate the allegations of the show cause notice. The forensic audit report was not furnished to them until directed by this Court in Writ Petition No. 6544 of 2021, by order dated 16.04.2021. They state that even after such disclosure, the bank did not give them any meaningful opportunity or hearing and they were pursuing remedies diligently and that the delay in filing the present Writ Petition occurred due to legal advice and the pendency of parallel matters before this Court and the NCLT.

1.4. Petitioners describe, in detail, the operational difficulties encountered by the company, including the seasonal nature of