A non-whole time director cannot be classified as a wilful defaulter unless there is conclusive evidence of their awareness and consent regarding the default, as per RBI guidelines.

ORDER :

1. The petitioner has filed the present writ petition challenging the impugned order, dated 29.09.2021 passed by the first respondent, wherein the petitioner was declared as willful defaulter and was given 15 days time to furnish his written representation if any to the review committee and to quash the same and seeking for a direction to the first respondent to remove the petitioner’s name from the list of wilful defaulters from its website and all other publications.

2. The petitioner is the Non Executive Director of ‘M/s. Sai Regency Power Corporation Private Limited’ [‘SRPCPL’ for short]. The petitioner was appointed as Non Executive / Non whole time Director of SRPCPL on 05.07.2005 with no involvement in the company’s day today activities and his limited role is reflected in the statutory filings, i.e., Form 32 and Form MGT-7 and SRPCPL’s annual reports. The SRPCPL is a power generation company and has entered liquidation under the NCLT in 2019- 2020. The first respondent has issued a show cause notice on 21.01.2021 alleging default by SRPCPL. The said notice lacks particulars such as the quantum of loan procured by the borrower, the dues to be paid by the borrower, chain of transactions to establish any siphoning, etc., The petitioner has sent a reply to the said notice on 01.02.2021 asserting his non involvement and citing the Reserve Bank of India’s [‘RBI’ for short] Master circular, 2015 which exempts non executive directors unless proven complicity. On 03.04.2021, the first respondent had issued a notice of personal hearing, to which the petitioner had sent a reply dated 16.04.2021 stating that the petitioner being the non whole time director is not required to participate in the proceedings and also raised pandemic related travel constraints at that point of time. Thereafter, the petitioner was required to provide documents to prove his claim and the petitioner has also furnished the documents. But the first respondent vide its impugned order dated 29.09.2021 declared the petitioner as a willful defaulter solely relying on an undisclosed forensic Audit report dated 25.01.2019. Therefore, the petitioner challenges the impugned order on the ground that it suffers from patent illegality and arbitrary exercise of power, rendering it constitutionally untenable and legally unsustainable. The forensic report was neither disclosed to the petitioner nor was subjected to rebuttal. Further, the impugned order is a non speaking order, devoid of reasoning or factual nexus between the allegations and the petitioner’s role as a non executive director. Though the petitioner has filed a review before the Review Committee on 26.10.2021, the same s pending. Hence, the present writ petition has been filed.

3. It is the stand of the first respondent Bank that the first respondent Bank had sanctioned credit facilities to the company based on the credentials and the projections submitted by the management of the company. During the year 2018-19, the first respondent bank conducted forensic Audit of the company for the period 2013-14 to 2017-18 through an audit firm M/s.P.Chandrasekhar LLP and the firm had submitted a report on 25.01.2019. As per the audit report, it was observed that several unauthorised transactions were done by the company and number of related party transactions were routed through the company’s account with UCO Bank with whom they did not avail any credit facilities. The report further sates that there were instances of amounts received from one related party and transferred to another related party on the same day. Therefore, there was clea