JUDGEMENT

1. The petitioners are invoking the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India, seeking issuance of appropriate writ, order or direction, thereby quashing or setting aside the impugned Show Cause Notice [“ SCN ”] dated 19.06.2024 issued by the respondent-bank. The following reliefs are sought in the present writ petition:-

“ A. Issue a writ of Certiorari or any other appropriate writ, orderor direction quashing the Impugned Notice dated19.06.2024 issued by the Respondent Bank being Ref No.IDBI/2024-

25/NMG/EPCCIL/184 and Impugned Noticedated 19.06.2024 issued by the Respondent Bank being RefNo. IDBI/2024-

25/NMG/EPCCIL/185 as illegal, invalidand null and void;

B. Issue a Writ of Certiorari or any other appropriate writ,order or direction quashing any steps/action taken pursuantto the Impugned Notice dated 19.06.2024 issued by theRespondent Bank being Ref No. IDBI/2024-25/NMG/EPCCIL/184 and Impugned Notice dated19.06.2024 issued by the Respondent Bank being Ref No.IDBI/2024-25/NMG/EPCCIL/185; and C . Pass any other order(s) as this Hon'ble Court may deem fitand proper in the facts and circumstances of the case.”

2. Learned counsel for the respondent appeared on advance notice.

3. Mr. Sandeep Sethi, learned Senior Advocate appearing for the petitioners while alluding to the impugned SCN, has firstly pointed out that petitioner No.1 has been addressed as an „Ex Independent Director‟; secondly, it is pointed out that the respondent-bank has alleged that certain acts of financial irregularities have been committed by the petitioner on different dates during the period from November, 2014 to 31st March 2017.

4. It was urged that the corporate borrower in question i.e. EPCCIL1 had evidently availed certain loan facilities from a consortium of eight banks including the respondent-bank and although in the impugned SCN, it is alleged that some financial irregularities amounting to fraud were committed by the company in question, it is urged that the truth of the matter is that the company in question was facing economic hardships as its business had taken a down-turn due to reasons beyond its control. It is pointed out that a forensic auditor viz., Grant Thornton LLP was appointed at the behest of the respondent-bank, and pursuant thereto, the respondent-bank communicated to the company in question that the action of „red flagging‟ of its account had already been withdrawn by them.

5. It is then pointed out that eventually, proceedings under Section 7 of the IBC2 were initiated against the corporate borrower before the

1EPC Constructions India Limited [formerly known as Essar Projects (India) Limited]
2Insolvency and Bankruptcy Code, 2016

NCLT3, Mumbai in C.P. (I.B.) No. 1832/(MB)/2017 titled as IDBI Bank v. EPC Constructions India Ltd. due to purported defaults in repayment of credit facilities obtained by it. Accordingly, w.e.f.

20.04.2018 the company was admitted to insolvency and appropriate CIRP4 proceedings were initiated by appointing a Committee of Creditors. Subsequently, an IRP5 was appointed w.e.f. 10.05.2018.

6. In the said backdrop, it is submitted that the impugned SCN has been issued in a mindless and mechanical manner, rather with a pre-

meditated mind overlooking the fact that no financial irregularity in the nature of fraud was found and the same is substantiated by forensic audit report conducted at the behest of the respondent-bank;

and it is urged that the petitioners were not even Directors since December, 2017 as evidently, the company had been proceeded under IBC and moratorium under section 14 of the IBC had crept in.

7. Alluding to clause 8.96 and 8.12.1 of the Master Directions of Frauds, it is vehemently urged that the impugned SCN clearly overlooks that the penal provisions could only be applied to non-

whole time directors (like nominee directors and independent directors) only in rarest