Madras High Court
M/S.Pallava Textile Limited vs The Reserve Bank Of India on 8 March, 2023
W.P.No.29967 of 2012
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 08.03.2023
CORAM :
THE HONOURABLE MR.JUSTICE S.M.SUBRAMANIAM
Writ Petition No.29967 of 2012
M/S.Pallava Textile Limited
Rep. By Its Director,
No.27C, Sankar Bypass Road,
Pallipalayam, Erode-638 006. ...Petitioner
-Vs-
1. The Reserve Bank Of India,
New Delhi.
2. ING VYSYA BANK LIMITED,
Jothi Theatre Road,
Vallipalayam,
Tiruppur-641 001.
3. Credit Information Bureau (India) Limited,
Hoechst House, 6th Floor,
193, Backbay Reclamation,
Nariman Point, Mumbai-21. ...Respondents
Prayer: Writ Petition filed under Article 226 of the Constitution of India
praying for the issuance of a Writ of Mandamus, directing the second
respondent to recall the communication classifying the petitioner as
wilful defaulter in exercise of power under Master Circular dated
01.07.2009 of the first respondent.
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W.P.No.29967 of 2012
For Petitioner : Mr.V.Anil Kumar
for Mr.R.S.Raghunathan
For Respondents :
(for R1) : Mr.C.Mohan
for M/s.Kingh & Patridge
(for R2) : Ms.jAiyashwaraya Nathan
for Mr.J.K.Bhaskar
(for R3) : Mr.KrishnaMoorthy
ORDER
The relief sought in the present writ petition is to direct the second
respondent to recall the communication classifying the petitioner as
wilful defaulter in exercise of power under Master Circular dated
01.07.2009.
2.The grievance of the petitioner is that subsequently, the
petitioner had settled loan dues and therefore, the declaration made by
the second respondent that the petitioner is a wilful defaulter is to be
removed.
3.The very relief sought for in the present writ petition is not
entertainable in view of the fact that no such communication is placed
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W.P.No.29967 of 2012
before this Court for consideration. In the absence of any such order
declaring the petitioner as wilful defaulter, the prayer as such sought for
to direct the second respondent, is not entertainable.
4.The learned counsel appearing for the first respondent drew the
attention of this Court with reference to the law settled by the Apex
Court of India in the cases of wilful default. In the case of State Bank of
India Vs. JAH Developers Private Limited, reported in 2019 (6SCC)
787, paragraph 24 reads as follows:
“24. Given the above conspectus of case law, we are
of the view that there is no right to be represented by a
lawyer in the in-house proceedings contained in Para 3 of
the Revised Circular dated 1-7-2015, as it is clear that the
events of wilful default as mentioned in Para 2.1.3 would
only relate to the individual facts of each case. What has
typically to be discovered is whether a unit has defaulted
in making its payment obligations even when it has the
capacity to honour the said obligations; or that it has
borrowed funds which are diverted for other purposes, or
siphoned off funds so that the funds have not been utilised
for the specific purpose for which the finance was made
available. Whether a default is intentional, deliberate, and
calculated is again a question of fact which the lender may
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W.P.No.29967 of 2012
put to the borrower in a show-cause notice to elicit the
borrower's submissions on the same. However, we are of
the view that Article 19(1)(g) is attracted in the facts of the
present case as the moment a person is declared to be a
wilful defaulter, the impact on its fundamental right to
carry on business is direct and immediate. This is for the
reason that no additional facilities can be granted by any
bank/financial institutions, and entrepreneurs/ promoters
would be barred from institutional finance for five years.
Banks/ financial institutions can even change the
management of the wilful defaulter, and a
promoter/director of a wilful defaulter cannot be made
promoter or director of any other borrower company.
Equally, under Section 29-A of the Insolvency and
Bankruptcy Code, 2016, a wilful defaulter cannot even
apply to be a resolution applicant. Given these drastic
consequences, it is 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 1-7-2013 permitted the borrower to make a
representation within 15 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 dated 1-7-2015, must give its order to the
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W.P.No.29967 of 2012
borrower as soon as it is made. The borrower can then
represent against such order within a period of 15 days to
the Review Committee. Such written representation can be
a full representation on facts and law (if any). The Review
Committee must then pass a reasoned order on such
representation which must then be served on the
borrower. Given the fact that the earlier Master Circular
dated 1-7-2013 itself considered such steps to be
reasonable, we incorporate all these steps into the Revised
Circular dated 1-7-2015. The impugned judgment is,
therefore, set aside, and the appeals are allowed in terms
of our judgment. We thank the learned Amicus Curiae,
Shri Parag Tripathi, for his valuable assistance to this
Court.”
5.In any event, the petitioner has not challenged any
communication or order issued by the second respondent declaring the
petitioner as wilful defaulter. Thus, the relief as such sought is not
entertainable and if at all, any grievance exist to the writ petitioner, he is
at liberty to approach the competent authority in the manner known to
law.
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W.P.No.29967 of 2012
6.Further the learned counsel for the petitioner made a submission
that second respondent/ING Vysya Bank Limited, has now merged with
Kotak Mahindra Bank and thus, he is at liberty to approach the Kotak
Mahindra Bank for redressal of its grievances if any.
7.Accordingly, the writ petition stands disposed of. No costs.
08.03.2023
Index:Yes
Speaking order
Neutral Citation:Yes
sha
To
1. The Reserve Bank Of India,
New Delhi.
2. ING VYSYA BANK LIMITED,
Jothi Theatre Road,
Vallipalayam,
Tiruppur-641 001.
3. Credit Information Bureau (India) Limited,
Hoechst House, 6th Floor,
193, Backbay Reclamation,
Nariman Point, Mumbai-21.
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W.P.No.29967 of 2012
S.M.SUBRAMANIAM, J.
sha
Writ Petition No.29967 of 2012
08.03.2023
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