Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + HC Insolvency and Bankruptcy - 2020 (2) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (2) TMI 1616 - HC - Insolvency and BankruptcyPrinciples of natural justice - power vested in him by law while initiating proceedings to classify the borrowers/directors of the company as wilful defaulters or not - allegation of initiation of proceedings with preconceived mind - improper constitution of the identification committee - HELD THAT:- It is undoubtedly true that although a Writ Court would be slow in entertaining a challenge to a show-cause notice, a challenge can indeed be entertained if objection is taken on the ground of lack of authority or jurisdiction of the officer/authority issuing such notice. In the event, the Court arrives at a conclusion that the officer issuing the show-cause notice lacks authority or jurisdiction to issue it, it goes without saying that the notice has to be quashed with the competent officer/authority being left free to issue notice afresh in accordance with law. Having regard to the scheme enshrined in the master circular as well as the object and purpose which is sought to be achieved by enforcement of the provisions thereof, in our considered view, the omission of the appellant no.2 to refer to the decision taken by the committee neither invalidates the show-cause notice nor is it bad only because the master circular does not expressly provide for delegation of power to issue the show-cause notice to any other officer of the bank - there can be no doubt that the master circular has been introduced to check siphoning of public funds by borrowers who, in the opinion of the lender bank, despite having resources to discharge their debt, neglect or omit to do so with a view to defraud the lender. While it is true that declaring a borrower as a wilful defaulter may result in evil/civil consequences, there are adequate safeguards provided in the master circular which are conceived in the interest of the borrower. However, in the instant case, the power has been exercised by the identification committee to prima facie identify the company as a wilful defaulter and such committee also retained the power to consider the objection that might be raised by the company and/or its directors as to why it/they should not be declared as wilful defaulters, prior to a final order being made in this behalf in accordance with the master circular by the review committee. What the identification committee has delegated to the regional office of the appellant no.1 is the issuance of the show-cause notice indicating the grounds on which the identification committee, prima facie, is of the view that there has been an occasion of wilful default on the part of the company and/or its directors - the regional office proceeding to issue the show-cause notice, even in the absence of express power of delegation, is insufficient to invalidate the proceedings that have been initiated under the master circular to declare the borrower and others, responsible for discharging the debt of the appellant no.1, as wilful defaulters. The show-cause notice appears to have been issued by the appellant no.2 pursuant to the decision of the identification committee taken in its meeting dated 29th June, 2017. Thus, there are no reason to hold that the show-cause notice suffers from a lack of jurisdiction rendering it vulnerable - Once it has been brought to the notice of the borrower that a proceeding has been initiated to declare him as a wilful defaulter on the ground mentioned in the show-cause notice, it becomes imperative for the borrower to dispel the prima facie conclusion that the identification committee might have reached and to urge that the proceedings be dropped. It is for this reason that we have refrained from examining the other contentions of Mr. Banerjee that there has been no consideration of the relevant documents which would justify even a prima facie conclusion that the writ petitioners had wilfully defaulted in repaying their debts and, therefore, created a situation where the appellant no.1 could declare them as wilful defaulters. Appeal allowed.
|