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2023 Supreme(Online)(Del) 17375
IN THE HIGH COURT OF DELHI AT NEW DELHI
Sachin Datta, J
SH. LAGADAPATI MADHUSUDHAN RAO & ORS. – Appellant
Versus
STATE BANK OF INDIA – Respondent
LPA 202/2023|W.P.(C) 12672/2022
For the Appellants/Petitioners: Mr. Saurabh Kirpal, Sr. Adv., Mr. Malak Bhatt, Ms. Neeha Nagpal, Mr. Rajat Bector, Mr. Nikhil Arora
For the Respondents: Mr. Rajiv Kapur, Mr. Akshit Kapur, Mr. Tushar Bagga
The procedure for identifying wilful defaulters must allow for representation and a reasoned response, fulfilling the principles of natural justice as per RBI guidelines.
Headnote:(A) Reserve Bank of India Master Circular on Wilful Defaulters - Breach of principles of natural justice - The appellants contested their classification as wilful defaulters by the respondent bank, asserting relevant documents were not supplied prior to identification - The Single Judge dismissed their writ petition but allowed representation to the Review Committee. (Paras 2-4, 19-24, 26-30)
(B) Natural Justice - Procedural Fairness - The court held that the opportunity to represent to the Review Committee constituted adequate compliance with natural justice requirements, contingent upon the Review Committee's obligation to pass a reasoned order. (Paras 20, 28)
(C) Findings of Court - The appellants failed to demonstrate a breach of natural justice and availed ample opportunities to present their case before the Identification Committee. (Paras 5, 19)
Facts of the case:
The appellants challenged identification as wilful defaulters by the respondent bank, claiming denial of procedural fairness in the identification process. The Single Judge allowed representation to the Review Committee while dismissing the writ petition.
Findings of Court:
The procedure followed by the Identification Committee was proper, and the appellants were allowed to represent their case to the Review Committee, ensuring compliance with natural justice.
Issues: The main issues were whether the appellants were deprived of natural justice and whether the respondent bank adhered to required procedures.
Ratio Decidendi: The court found no merit in the appellants' claims as they had multiple opportunities to present their case, and procedural compliance was observed.
Result: The appeal was dismissed, allowing the appellants to seek recourse in the Review Committee process.
| Table of Content |
|---|
| 1. appeal filed against a declaration as wilful defaulters. (Para 1 , 2) |
| 2. claim of breach of natural justice in proceedings. (Para 3) |
| 3. detailed examination of procedural aspects and previous communications. (Para 4 , 5 , 7 , 9) |
| 4. emphasis on provision of documents by the bank and hearing opportunities. (Para 10 , 12 , 13 , 18) |
| 5. identification of wilful default criteria and supreme court directives. (Para 19 , 20 , 21 , 22) |
| 6. guidelines for representation against wilful default classification. (Para 24 , 27) |
| 7. conclusion on dismissal of the appeal with opportunity for representation. (Para 29 , 30) |
JUDGMENT
LPA 202/2023
1. The present appeal has been filed by the appellants being aggrieved by the order dated 13.03.2023, passed by the learned Single Judge in W.P.(C) 12672/2022. The said writ petition was filed by the appellants seeking
(i) setting aside of the letter dated 19.08.2022 issued by the respondent, whereby the appellants have been declared as Wilful Defaulters; and
(ii) setting aside of the decision taken by the Identification Committee of the respondent bank on 27.07.2022 identifying the appellants as Wilful Defaulters.
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2. By the aforesaid impugned order dated 13.03.2023 the learned Single Judge has dismissed the writ petition filed by the appellants and has granted liberty to the appellants to file a detailed representation within 10 days from the date of the said order before the Review Committee under the RBI Master Circular , which would be considered by the said Review Committee, and a reasoned order passed thereon. The contention of the appellants that relevant documents were not supplied to them was also left open to be considered by the Review Committee. The said order reads as under:- “1. After hearing the learned counsel appearing on behalf of the parties, it is seen that the instant petition is against the order passed by the Wilful Defaulter Identification Committee.
2. The petitioners have not yet approached the Review Committee under RBI Master Circular .
3. As far as the argument raised by the learned counsel appearing on behalf of the petitioner to the effect that the relevant documents were not supplied to the petitioner to enable him to challenge the impugned order is concerned, the same would be for the Review Committee to consider in accordance with law.
3. Leaving all questions raised by the petitioner in the instant petition open, this court grants liberty to the petitioner to file a detailed representation within 10 days from today before the Review Committee under the RBI Master Circular
4. If such a representation is filed, the Review Committee is under an obligation to decide the same in accordance with law by a reasoned order to be communicated to the petitioner immediately thereafter.
5. Having considered the facts and circumstances in the instant case, especially, the order dated 05.09.2022 whereby the stay was granted, this court finds it necessary to direct that once the order is passed by the Review Committee, the same shall not be given effect for a period of 15 days to enable the petitioner to take appropriate recourse in accordance with law.
6. Leaving all questions open, the instant petition stands disposed of.”
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3. The contention of the appellants in the present appeal is that the learned Single Judge failed to appreciate that there has been breach of principles of natural justice inasmuch as the appellants have been declared as Wilful Defaulters by the respondent without being given an opportunity to make submissions before the Identification Committee. It is submitted that the learned Single Judge has failed to appreciate that the respondent bank has failed to follow the procedure as prescribed under clause 3 of the RBI Master Circular bearing No. DBR No. CID.BC.22/20.16.003/2015-16 dated 01.07.20151 read with judgment of the Supreme Court in State Bank of India v. Jah Developers Put. Ltd. & Ors., [(2019) 6 SCC 787]. It is stated that basis of such declaration against
