Telangana High Court

Salalith Tottempudi vs Union Of India on 28 June, 2022

Bench: G.Radha Rani

               THE HON'BLE Dr. JUSTICE G. RADHA RANI

                       WRIT PETITION No.20680 OF 2021

ORDER:

This Writ petition is filed by the petitioners challenging the action

of the respondent No.2-Bank classifying the petitioners as willful

defaulters and publishing their names in the CIBIL list of Willful

Defaulters on 30.09.2020 and the consequent notice of respondent No.2-

Bank dt.13.08.2021 whereby it was proposed to publish the names and

photographs of petitioners in the newspapers/magazines as illegal,

arbitrary, in violation of Section 2(60) of Companies Act, 2013 contrary

to the terms of RBI Circular 2015-16/100/DBR No.CID.bc.22/

20.16.003/2015-16 dt.1.7.2015, and against the law laid down by the

Hon'ble Apex Court in State Bank of India Vs. M/s Jah Developers

Private Limited and others1 in violation of Article 19(1)(g) of the

Constitution of India and against the principles of natural justice.

2. Heard Sri Bikki Raveendra Babu, learned counsel for the

petitioners and the learned Panel Advocate for respondent No.2-Bank.

2019 (6) SCC 787 - Civil Appeal No.4776/2019 Dr.GRR,J

3. The petitioners were erstwhile Directors of M/s.Totem

Infrastructure Limited, which was an unlisted Public Company

registered under the Companies Act, 1956 having its registered office at

H.No.8-2-334/B/2, Road No.5, Banjara Hills, Hyderabad, Telangana -

500 082. The said Company availed certain credit facilities from

respondent No.2 vide sanction letter No.IDBI(H)No.955/ICG(TIL)

dt.25.09.2009. The said credit facilities were revised by the respondent

No.2 vide its renewal-cum-enhancement of working capital limits vide

its letter IDBI(H) No.1798/ICG(TIL) dated 23.10.2010.

3.1 The Company failed to maintain its account with respondent No.2

as per the terms and conditions on which the said credit facilities were

granted and ultimately their account was classified as Non-Performing

Asset (N.P.A.) as on 30.06.2012. The Consortium of Banks, led by the

Union Bank of India had filed an application vide O.A.No.154 of 2014

(old), O.A.No.1653 of 2017 (new) before the Debt Recovery Tribunal-

II, Hyderabad, for recovering a total sum of Rs.864,36,71,855/- from the

Company. The Tribunal passed ex parte orders in the matter on

30.06.2017 directing the petitioners to pay a sum of Rs.89,70,21,112/- to

the respondent No.2. The State Bank of India also filed Company Dr.GRR,J

Petition (IB)No.625/7/HDB/2019 before the National Company Law

Tribunal (NCLT), Hyderabad, and initiated Corporate Insolvency

Resolution Process against the Company. The National Company Law

Tribunal admitted Section 7 application and commenced CIRP in

respect of the Company.

3.2 The petitioners had preferred appeal against the order of National

Company Law Tribunal before the National Company Law Appellate

Tribunal, but the same was dismissed. The petitioners further preferred

an appeal before the Hon'ble Apex Court and the same was pending.

The Company was declared as fraud by a Consortium of lenders,

including respondent No.2 herein and the same was reported to Reserve

Bank of India on 07.09.2018. The respondent No.2 vide letter reference

No. IDBI/NMG-HYD/090/TIL/2019-20 dt.13.06.2019 filed a criminal

complaint with Central Bureau of Investigation, Bangalore, against the

Company and its erstwhile promoters/directors i.e. petitioner Nos.1 and

2 herein. The Central Bureau of Investigation registered a case as

RC0782019E0005 and the investigation was under progress.

Dr.GRR,J

4. In the background of these facts, petitioners filed the present Writ

Petition challenging the action of respondent No.2 in declaring them as

Willful Defaulters as per RBI guidelines.

5. Learned Counsel for the petitioners submitted that petitioners

were contesting proceedings initiated by the officials as and when they

received notices. The petitioners were residing in the address given in

the cause title right from the year 2015 and they were appearing before

the Investigating Authorities and the Enforcement Directorate

Authorities right from 2018. Notices were not received by the

petitioners from respondent No.2 Bank classifying them as Willful

Defaulters. For the first time, the respondent No.2 Bank issued

'Advance Notice' to Willful Defaulters prior to publication of their

names and photographs in newspapers/magazine dt.13.08.2021 showing

the address as Villa No.86, Lumbini S.L.M. Springs, Gachibowli,

Kondapur road, Hyderabad - 500 042, in which the petitioners were

residing since 2015. The said notice was received by the petitioners on

18.08.2021. Prior to that, no notice was sent by the respondent No.2-

Bank to the address to which the notice dt.13.08.2021 was sent. In the

said notice, petitioners were called upon to pay the entire outstanding Dr.GRR,J

amount of Rs.314,27,13,211.88 ps., as on 01.07.2021 together with

interest accrued thereon within a period of 15 days from the date of

receipt of the notice, failing which, their names and photographs would

be published in newspapers and magazines.

5.1 The learned counsel for the petitioners further submitted that the

petitioners, after receiving notice dt.13.08.2021, verified the CIBIL

website of respondent No.2 Bank and came to know that they were

classified as Willful Defaulters. The Aadhar cards and Passports of the

petitioners would disclose that they were residing in the address given in

the cause title since 2015. The Deputy Superintendent of Police, CBI,

Bangalore, in the application for judicial custody of the petitioners in

RC.No.06(E)/2017 of CBI, BS & FC, Bangalore, clearly stated that

petitioners were not residing in Flat No.205, Hanging Gardens, Road

No.10, near Bombay Stores, Banjara Hills, Hyderabad, since 5 years and

they were residing in Villa No.86, Lumbini S.L.M. Springs near

Botanical Gardens, Gachibowli, Hyderabad. In the notice dt.13.08.2021

issued by respondent No.2 Bank itself it was clearly stated that show

cause notice dt.02.01.2019, said to have been issued by the respondent

No.2 Bank, was not served on the petitioners and it was further stated Dr.GRR,J

that the said show cause notice was published in the newspapers on

31.05.2019. The respondent No.2-Bank did not chose to state on which

address the show cause notice was sent in January, 2019. The

respondent No.2 Bank also did not chose to state in which newspapers

they had published the show cause notice. The respondent No.2 Bank

had not given any opportunity to the petitioners to submit their

explanation. The mechanism and procedure contemplated in the Master

Circular No.DBR.No.CIB.GC.22/20.16.003/ 2015-16 dt.01.07.2015

issued by the Reserve Bank of India had not been followed by the

Identification Committee for Willful Defaulters while accepting the

proposal for Identification of petitioners as Willful Defaulters and

classifying them as such.

5.2 The learned Counsel for the petitioners further submitted that as

per clause 3(a) of R.B.I. Circular dated 01.07.2015, the evidence of

Willful Default at relevant time should be examined by a committee

identified by Executive Director and two other Senior Officers of the

rank of G.M./D.G.M. and in case if the committee concluded that an

event of Willful Default occurred, the committee should issue a show

cause notice calling for their submissions. In this case, no show cause Dr.GRR,J

notice was served on the petitioners, therefore, the petitioners were

unable to state whether the show cause notice was issued by the Banker

or by the Committee. The petitioners were not served with any notice of

personal hearing before the Identification Committee for Willful

Defaulters and no opportunity of personal hearing was given to them.

The petitioners were not served with the copy of the order passed by the

Identification Committee on Willful Defaulters. The petitioners were

not served with any notice from the Review Committee on Willful

Defaulters. No opportunity of personal hearing was given to the

petitioners even before the Review Committee. The petitioners were not

served with the Audit report in respect of M/s Totem Infrastructure

Limited.

5.3 The learned Counsel for the petitioners further submitted that the

respondent No.2 Bank without following the instructions and guidelines

given by the R.B.I. in its Master Circular dt.1.7.2015, chose to classify

the petitioners as Willful Defaulters. The respondent No.2 bank had not

complied with the directions of the Hon'ble Apex Court in the case of

State Bank of India Vs. M/s Jah Developers Private Limited and Dr.GRR,J

others2. The declaration of the petitioners as Willful Defaulters was

having serious consequences as they were prevented from getting any

financial assistance from any Bank or financial institutions and could

not be made as Directors in any other Company. Moreover, the

declaration of Willful Default was a disqualification under Section 29-A

of the Insolvency and Bankruptcy Code, 2016 to apply to be a

Resolution Applicant in CIRP process of any Company. In case the

operation of the classification of petitioners as Willful Defaulters as

published in CIBIL dt.30.09.2020 was not suspended, petitioners would

be put to huge hardship and unable to do business. If the respondent

No.2 published the names of the petitioners and their photographs in

newspapers/magazines, it would cause immense and irreparable loss and

damage to their reputation, and prayed to allow the petition.

6. The Interim suspension of the classification of the petitioners as

Willful Defaulters was ordered by this Court on 01.09.2021.

7. The learned Panel Counsel for respondent No.2 bank submitted

that vacate stay petition was filed along with the counter affidavit and

submitted that respondent No.2 had issued various communication

2019(6) SCC 787 Dr.GRR,J

letters/show cause notices to the petitioners as stipulated by Clause 3(b)

of RBI Circular 2015-16/100/DBR No.CID.BC.22/20.16.003/2015-16

dt. 01.07.2015 while initiating action against the petitioners as Willful

Defaulters. The respondent No.2 had adhered to the procedure

prescribed under Clause 3 of the Circular in compliance with the

principles of natural justice. The Company and its promoters/Directors

routed funds through the non-lending banks during June, 2009 to

December, 2011. The fraud was committed by the petitioners prior to

the date when the petitioner No.2 ceased to be a Director i.e. on

31.03.2012. Respondent No.2 issued show cause notice as per clause

3(b) of the Circular on 02.01.2019 to the petitioners on the addresses

given by them as per the KYC documents submitted by the petitioners,

but the same were returned undelivered. It was the petitioners who

neglected to provide the respondent No.2 with their updated address.

The respondent No.2 further published in Financial Express (Lucknow

Edition) as well as Hans India (Hyderabad Edition) on 31.05.2019.

Even post such publication, the petitioners again failed to submit their

representation to the respondent No.2 regarding the show cause notice.

Dr.GRR,J

7.1 The learned Panel Counsel for respondent No.2 bank further

submitted that respondent No.2 issued intimation letter to the petitioners

vide reference No.IDBI/NMG/HYD/358/TIL/2019-20 dated 18.01.2020,

IDBI/NMG/HYD/383/TIL/2019-20 dated 04.02.2020, and IDBI/NMG/

HYD/388/TIL/2019-20 dated 07.02.2020 informing them about the

Willful Defaulters Committee's decision to declare M/s.Totem

Infrastructure Limited and its Directors/Promoters, including the

petitioners as Willful Defaulters as per the grounds that were detailed in

the said show cause notice. In view of principles of natural justice, the

respondent No.2 again provided them with a final opportunity to defend

their case and to submit their representation before the Review

Committee on Willful Defaulters within 15 days of issuance of the said

letter. The petitioners were reminded that any further failure in making

their representation, would deem that they had no submissions and

respondent No.2 would classify their accounts as Willful Defaulters as

per the R.B.I. circular. The petitioners again failed to submit their

representation/defence to the requisite authorities of respondent No.2 on

Willful Defaulters and therefore being left with no alternative,

respondent No.2 was compelled to issue another notice bearing

Ref:IDBI/NMG/HYD/TIL/108/2020-21 dated 30.07.2020 informing the Dr.GRR,J

petitioners about the final decision of the Willful Defaulters Review

Committee dated 26.06.2020 regarding classifying the petitioners as

Willful Defaulters. It was evident that respondent No.2 had time and

again issued multiple notices to the petitioners at the address provided

by them as per Clause 3(b) of the RBI Circular and had also published

the show cause notice in newspapers, when the same was returned

undelivered. The fact that they had not received any of the notices

issued by the respondent No.2 would show their own negligence and

failure to inform the respondent No.2 of their renewed address or even

diligently track the paper publication of the issued show cause notice

dt.31.05.2019. Further, the notice so issued to the Company and

petitioner No.1 dt.07.02.2020 was delivered in person during the lenders

meeting held on 07.02.2020. The respondent No.2 had issued advance

notice dt.13.08.2021 for publishing their names and photographs in

newspapers/magazines, which was duly delivered to and acknowledged

by the petitioners. The advance notice was issued to them by the

respondent No.2 only after religiously adhering to the mandates

stipulated by Clause 3 of the RBI Circular in declaring the petitioners as

Willful Defaulters.

Dr.GRR,J

7.2 The learned Panel Counsel for respondent No.2 bank further

submitted that respondent No.2 had issued multiple show cause

notices/intimation letters to the petitioners and provided them with

multiple opportunities to present their representations before the Willful

Defaulters Committee as well as Willful Defaulters Review Committee

in order to accord them a fair chance to defend their case. It was only

when the petitioners time and again failed to provide their representation

before the requisite authorities of respondent No.2, the respondent No.2

left with no other alternative, proceeded without the petitioners'

representation. The petitioners failed to share or submit their latest

communication address to respondent No.2. It was only during lenders'

meeting on 07.02.2020, the petitioner No.1 shared the updated

communication address. The petitioners had not disclosed or submitted

any proof of latest communication address or any KYC documents to

respondent No.2 before 07.02.2021. It was the petitioners who were

required to update their communication address with respondent No.2

from time to time, as per their guidelines. The address of the Company,

in which the petitioners were directors, is the same as was mentioned in

the website of Ministry of Corporate Affairs and that the said address

was also the one that was mentioned in National Company Law Dr.GRR,J

Tribunal's order dt. 12.01.2021, admitting the Company into Corporate

Insolvency Resolution Professional. The petitioners never raised any

objection with respect to change in their address during the pendency of

the said Section 7 application before National Company Law Tribunal.

The respondent No.2 had diligently issued the show cause notice to the

petitioners in the address that was availed before them, which was the

same as the ones mentioned in the Ministry of Corporate Affairs

Website and the order of the Hon'ble National Company Law Tribunal

in CP(IB) No.625/7/HDB/2019, which proves their mala fide intention

in raising the contention at such later stage. The Willful Defaulters final

intimation letters dated 30.07.2021 so issued to the petitioners through

speed post, were delivered and acknowledged. Neither the Company

nor the petitioners submitted the updated copy of their Aadhar Card and

Passport to respondent No.2 till date. The respondent No.2 issued all

the show cause notices and other notices as per the information /

documents that were available with them and as per the address of the

Company which was available on the website of Ministry of Corporate

Affairs. As per the RBI guidelines, the borrowers/account holders need

to submit KYC documents for periodic updates and since no such

documents had been submitted by the petitioners for required updates in Dr.GRR,J

respondent No.2's records, it would show their own negligence, and

prayed to dismiss the petition.

8. Perused the record. In the light of the contentions of the learned

counsel for both parties, it is considered necessary to extract the

mechanism for identification of Willful Defaulters as laid down in para

3 of the Master Circular issued by RBI vide Circular No.

DBR.No.CIB.GC.22/20.16.003/2015-16 dated 01-07-2015.

"3.The mechanism referred to in paragraph 2.5 above should generally include the following:

(a) The evidence of willful 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.

(b) If the Committee concludes that an event of willful default has occurred, it shall issue a Show Cause Notice to the concerned borrower and the promoter / whole time director and call for their submissions and after considering their submissions issue an order recording the fact of willful default and the reasons for the same. An opportunity should be given to the borrower and the promoter / whole-time director for a personal hearing if the Committee feels such an opportunity is necessary.

(c) The Order of the Committee should be reviewed by another Committee headed by the Chairman / Chairman & Managing Director or the Managing Director & Chief Executive Officer / CEOs and consisting, in addition, to two independent directors / Dr.GRR,J

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 willful defaulter, then the Review Committee need not be set up to review such decisions.

(d) As regard a non-promoter / non-whole time director, it should be kept in mind that Section 2(60) of the Companies Act, 2013 defines an officer who is in default to mean only the following categories of directors:

(i) whole-time director

(ii) where there is no key managerial personnel, such director or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified;

(iii) every director, in respect of a contravention of any of the provisions of Companies Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings and who has not objected to the same, or where such contravention had taken place with his consent or connivance. Therefore, except in very rare cases, a non- whole time director should not be considered as a willful defaulter unless it is conclusively established that:

I. he was aware of the fact of willful default by the borrower by virtue of any proceedings recorded in the minutes of meeting of the Board or a Dr.GRR,J

Committee of the Board and has not recorded his objection to the same in the Minutes; or,

II. the willful default had taken place with his consent or connivance. The above exception will however not apply to a promoter director even if not a whole time director.

(iv) As a one-time measure, Banks / FIs, while reporting details of willful defaulters to the Credit Information Companies may thus remove the names of non-whole time directors (nominee directors / independent directors) in respect of whom they already do not have information about their complicity in the default / willful default of the borrowing company. However, the names of promoter directors, even if not whole time directors, on the board of the willful defaulting companies cannot be removed from the existing list of willful defaulters.

(e) A similar process as detailed in sub-paragraphs (a) to (c) above should be followed when identifying a non-promoter / non-whole time director as a willful defaulter."

Thus as per clause 3(a) of RBI circular dated 1-7-2015, the evidence of

willful default on the part of the borrowing company and its

promoter/whole time director at the relevant time should be examined

by a Committee. The Committee shall be headed by an Executive

Director or equivalent and shall consist of two other senior officers of

the rank of GM/DGM and the Committee if concludes that an event of Dr.GRR,J

willful default had occurred shall issue a show cause notice to the

concerned borrower and the promoter/whole time director and after

considering their submissions shall issue an order recording the fact of

willful default with reasons. An opportunity should be given to the

borrower and promoter/whole time director for a personal hearing, if the

Committee feels such an opportunity as necessary.

9. Admittedly, no show cause notice was served on the petitioners.

The Respondent No. 2 was acknowledging the fact that the notices were

undelivered though he was contending that he issued notices to the

addresses available with them and throwing the blame on the petitioners

that it was the petitioners who were required to update their

communication address with respondent No.2 from time to time. The

learned counsel for the petitioners contended that the respondent banks

were regularly in touch with the petitioners and they had the petitioners

contact numbers and email addresses but they chose not to resort to any

other option in serving the notices and trying to shift the blame on to the

petitioners for their non compliance. The show cause notice enclosed to

the counter affidavit filed by the respondents dated 2-1-2019 was issued

by the Deputy General Manager-NMG of the IDBI bank. It was not Dr.GRR,J

issued by the Committee as per the guidelines issued by RBI in its

Master Circular dated 1-7-2015. The respondent No. 2 contended that as

the show cause notices were returned unserved, they made a publication

in Financial Express (Lucknow edition) as well as Hans India

(Hyderabad edition) on 31-9-2019 and filed them as Annexure IX. The

copy of the newspaper publication in Financial Express is pertaining to a

director by name Sri. Ajay Singh Chauhan, who was a resident of

Lucknow, UP. The publication pertaining to the petitioners was

published in Hans India (Hyderabad edition) which was not a largely

circulated newspaper. The copies of any notice of personal hearing

before the Identification Committee for Willful Defaulters were also not

enclosed by the respondents. They filed the letter dated 18-01-2020

alleged to be sent to the petitioners address at Banjara Hills, Hyderabad

which would state that the Branch had sent the show cause notices by

registered post on 2-1-2019 and when the SCN's were returned

undelivered, they were published in newspaper on 31-5-2019 and even

after 15 days from the publication of the referred SCN's, they had not

received any representation or response from the petitioners, as such

they decided to declare the company and its director/promoters as

Willful Defaulters on the grounds mentioned in the SCN. In order to Dr.GRR,J

comply principles of Natural Justice, it was proposed to provide a final

opportunity to submit their further representation, if any on the

classification as Willful Defaulter and asked them to send their further

submission/representation in writing, if any, for consideration by the

Review Committee on Willful Defaulters within the 15 days from the

date of the letter. Thus it was a notice of information that the matter was

sent to the Review Committee but not an opportunity for personal

hearing before the Identification Committee.

10. The learned counsel for the petitioners contended that no copy of

the order passed by the Identification Committee was served on the

petitioners as mandated by the procedure stipulated by the RBI in its

circular. The copy of the order, if any passed by the Identification

Committee on Willful Defaulters was also not enclosed to the counter

affidavit filed by the respondents to consider that such order was passed

by the Identification Committee of Willful Defaulters. When the

respondent No. 2 was admitting that the notice dated 2-1-2019 was

undelivered, the question of replying to the same would not arise. When

the preliminary notice itself was not served on the petitioners, the

subsequent action of the respondent No.2 in issuing further notices and Dr.GRR,J

proceeding further with Willful Defaulters Review Committee without

the representation of the petitioners was in violation of the Principles of

Natural Justice.

11. The Hon'ble Apex Court in Kothari Filaments and another Vs.

Commissioner of Customs (Port), Kolkata and others3 held that:

"there is hardly any distinction between an administrative order and a quasi judicial order. There might have been difference of opinions at one point of time, but it is now well-settled that a thin demarcated line between an administrative order and quasi-judicial order now stands obliterated {See A.K. Kraipak and Ors. v. Union of India and Ors and Chandra Bhawan Boarding and Lodging, Bangalore v. State of Mysore and Anr. [AIR 1970 SC 2042] and S.L. Kapoor v. Jagmohan and Ors. [(1980 4 SCC 379]. A person charged with mis-declaration is entitled to know the ground on the basis whereof he would be penalized. He may have an answer to the charges or may not have. But there cannot be any doubt whatsoever that in law he is entitled to a proper hearing which would include supply of the documents. Only on knowing the contents of the documents, he could furnish an effective reply."

Recently, in V.C. Banaras Hindu University v. Shrikant4 , this Court

stated the law, thus:

An order passed by a statutory authority, particularly when by reason whereof a citizen of India would be visited with civil or evil consequences must meet the test of reasonableness."

It was observed:

(2009) 2 SCC 192

2006 (6) SCALE 66 Dr.GRR,J

"Justice, as is well known, is not only be done but manifestly seem to be done. If the assessee is put to notice, he could show that the nature of accounts is not such which would require appointment of special auditors. He could further show that what the assessing officer considers to be complex is in fact not so. It was also open to him to show that the same would not be in the interest of the Revenue."

12. The Hon'ble Apex Court in State Bank of India Vs. M/s Jah

Developers Private Limited and others 2019 (6) SCC 787 stated the

necessity to follow the procedure mandatorily as per the Master Circular

dated 1-7-2013 which was revised by the Circular dated 1-7-2015 and

that the order of the first Committee after para 3(b) of the revised

circular 1-7-2015 must be given to the borrower as soon as it was made

so that the borrower could then represent against such order within a

period of 15 days to the Review Committee and the Review Committee

must then pass a reasoned order on such representation and it should be

served on the borrower. The relevant para is extracted as under.

"21. 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 paragraph 3 of the Revised Circular dated 01.07.2015, as it is clear that the events of willful default as mentioned in paragraph 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 Dr.GRR,J

utilized 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 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 willful 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 willful defaulter, and a promoter/director of a willful defaulter cannot be made promoter or director of any other borrower company. Equally, under Section 29A of the Insolvency and Bankruptcy Code, 2016, a willful 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 paragraph 3 of the Master Circular dated 01.07.2013 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 paragraph 3(b) of the Revised Circular dated 01.07.2015, 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 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 01.07.2013 itself considered such steps Dr.GRR,J

to be reasonable, we incorporate all these steps into the Revised Circular dated 01.07.2015. The impugned judgment is, therefore, set aside."

13. Thus, the above procedure as mandated under the RBI guidelines

as well as the Hon'ble Apex Court in Jah Developers case was not

followed by the respondent No.2.

14. As per the respondent No.2, the petitioners shared their updated

communication address during the lenders meeting held on 7-2-2020.

But subsequent to that day also, the previous communications were not

shared with the petitioners and the respondent No.2 had not sought any

reply/action on the previous actions. Instead of choosing to do so, the

respondent No.2 directly jumped on to declare the petitioners as Willful

Defaulters without there being any reply from the petitioners. Hence it is

considered fit to set aside the action of respondent No. 2 in classifying