Madhya Pradesh High Court
Mr. Gulab Agrawal vs Idbi Bank Limited on 25 March, 2025
Author: Vivek Agarwal
Bench: Vivek Agarwal
1 WP-25641-2021
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
WP No. 25641 of 2021
(MR. GULAB AGRAWAL AND OTHERS Vs IDBI BANK LIMITED AND OTHERS )
Dated : 25-03-2025
Shri Satish Agrawal, Advocate for petitioners.
Shri Bhavil Pandey, Advocate for the respondent No.1.
Petitioners' contention is that petitioners are aggrieved of order dated
23.08.2021, Annx.P/9, whereby, petitioners were declared to be wilful
defaulters.
It is submitted that there are two master circulars. First is Annx.P/1,
which are the RBI guidelines dated 01.07.2015, and as per these RBI
guidelines, in para 3, certain steps have been given which are required to be
followed before declaring a party to be a wilful defaulter.
It is submitted that first step is that the evidence of wilful default on
the part of the borrowing company and its promoter/whole time Director at
the relevant time should be examined by a committee headed by an
Executive Director or equivalent and consisting of two other senior officers
of the rank of GM/DGM.
It is submitted that in Clause (B) of para 3, it is provided that if the
aforesaid committee concludes that an event of wilful default has occurred, it
shall issue a show cause notice to the concerned borrower and the promoter
full time Director and call for their submissions. Thereafter, giving an
opportunity of hearing, and receiving the response if any, Clause (C),
provides that the order of the committee shall be reviewed by another
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committee headed by the Chairman/Chairman and Managing Director or the
Managing Director and Chief Executive Officer/CEOs and consisting, in
addition, to two independent Directors/Non-Executive Directors of the Bank
and the order shall become final only after it is confirmed by the said review
committee. However, if the Identification Committee does not pass an order
declaring a borrower as a wilful defaulter in the review committee need not
be set up to review such decisions.
Referring to Annx.P/13, which are the guidelines of 2013, issued by
the RBI, it is submitted that there is a provision for giving hearing which has
been incorporated in the master circular of 2015 by the Supreme Court in
State Bank of India Vs. Jah Developers Pvt. Ltd. and others [(2019) 6 SCC
787].
Reading para 24 of the said judgment, it is pointed out that Supreme
Court has held that since the declaration of a borrower or any other party as a
wilful defaulter, has drastic consequences, it is made clear that the revised
circular, being in public interest, must be construed reasonably. "This being
so, and given the fact that para 3 of the master circular dated 01.07.2013,
permitted the borrower to make a representation within fifteen days of the
preliminary decision of the first committee, we are of the view that first and
foremost, the committee comprising of the Executive Director and two other
senior officials, being the first committee, after following para 3(B) of the
revised circular must give its order to the borrower as soon as it is made.
The borrower can then represent against such order within a period of fifteen
days to the review committee. Such representation can be a full
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representation on facts and law. The review committee must then pass a
reasoned order on such representation which must then be served on the
borrower, even the fact that the earlier master circular dated 01.07.2013,
itself considered such steps to be reasonable, we incorporate all these steps
into the revised circular dated 01.07.2015.
Thereafter, it is submitted that firstly no committee was constituted in
terms of Clause 3(A) of master circular dated 01.07.2015.
Second submission is that evidence was not collected and compiled by
the said first committee.
Thirdly, no evidence was supplied to the petitioners/borrowers along
with the show cause notice.
Thereafter, it is submitted that Annx.P/3, was submitted by the
petitioners as a representation, but it was rejected by the DGM, who is not
the competent authority and least not the committee entrusted with the work
under the master circular.
It is further submitted that on 14.06.2021, vide Annx.P/4, Forensic
Audit Report was provided without pointing out that which portion of the
evidence is required to be relied on and that has caused prejudice to the
petitioner. Thereafter, it is submitted that another representation Annx.P/5
was made on 25.06.2021, but without considering it, notice for personal
hearing dated 06.07.2021 was issued as contained in Annx.P/6, and
thereafter, final orders have been passed on 02.09.2021, vide Annx.P/10.
Thus, it is submitted that there being non-transparency and non-
adherence to the procedure to be followed, the impugned decision of
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declaring the petitioners to be a wilful defaulter, is not maintainable in the
eyes of law.
Reliance is placed on the judgments of this Court in
W.P.No.8606/2022, decided by a Coordinate Bench on 18.01.2023, in M/s
Sanwaria Consumer Ltd. earlier known as M/s Sanwaria Agro Oils Ltd. Vs.
Central Bank of India, Finolex Industries Limited Vs. Reserve Bank of
India decided by Bombay High Court and reported in 2011 SCC Online
Bom. 1781.
At this stage, looking to the paucity of time and there is huge number
of out of turn mention cases, showing urgency to be taken for hearing up
those matters, proceedings are adjourned for further hearing.
Shri Satish Agrawal, learned counsel submits that there is bereavement
in his family and he is attending last rituals in regard to said bereavement,
therefore, he prays for listing of this case on 01.04.2024.
List this case on 01.04.2025. It will be taken up as first case at 02:30
p.m. and this Court hopes and trusts that Shri Satish Agrawal, learned
counsel shall conclude his further arguments with half an hour so that 45
minutes time will available to Shri Bhavil Pandey, Advocate.
(VIVEK AGARWAL)
JUDGE
A.Praj.
