TMI Blog2015 (12) TMI 1381X X X X Extracts X X X X X X X X Extracts X X X X ..... nd / or his representatives would not delay the proceedings, an advocate appearing for them would. Moreover the members of GRC can always control and guide the proceedings before it and as per the exigencies limit the time of hearing. We therefore conclude that the GRC of the appellant banks erred in denying representation through the advocates to the respondent. We further hold that the borrowers or the Banks/FIs who are proposed to be classified/ declared as wilful defaulters and are given an opportunity of hearing before the GRC are entitled to be represented therein through advocates. We however hasten to clarify that the GRC would be fully empowered to control including as to the duration and guide the hearing and if finds dilatory and vexatious tactics being adopted, to take suitable consequential actions. The appeals are accordingly dismissed. The appellant banks to proceed to fix a date of hearing before their GRC, to proceed with their proposal for declaring the respondents as wilful defaulters - LPA 589/2014, CMs No.14796/2014 (for stay) & 14798/2014, LPA No.113/2015 & CM.No.3742/2015 (for stay) - - - Dated:- 17-12-2015 - MR. RAJIV SAHAI ENDLAW, J. For The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e RBI‟s Circular aforesaid, has availed of opportunity to be heard by the GRC of the said Bank / FI to oppose such a proposal, has a right to be represented by an Advocate in the said hearing. 3. The appellant Punjab National Bank (PNB) in LPA No.589/2014 proposed to so classify the respondents No.1 to 3 i.e. Kingfisher Airlines Limited, United Breweries (Holdings) Ltd. and Dr. Vijay Mallya as wilful defaulters and gave an opportunity to the said respondents to represent thereagainst; the respondents, besides representing, sought a hearing. The GRC of the appellant PNB though gave a hearing, as mandated by the Circular aforesaid of the RBI, but during the said hearing objected to the said respondents being represented by a Senior Advocate. 4. This led to the filing by the respondents of W.P.(C) No.5532/2014 from which the LPA No.589/2014 arises. The said writ petition came up before the learned Single Judge of this Court on 28th August, 2014 when the counsel for the appellant PNB appeared on advance notice and contended that the GRC of the appellant PNB, which was to give a hearing, comprised of the Executive Director, Chairman-cum-Managing Director and a General Manage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alia by fixing the date of hearing and by clarifying that the respondents / writ petitioners would have a right of representation in the said hearing through an Advocate or a Senior Advocate but with the condition that the oral submissions will be confined to six hours and the hearing would be concluded on 22nd September, 2014 itself. The respondents / writ petitioners were however given liberty to file written submissions and documents. 6. Aggrieved therefrom LPA No.589/2014 was filed along with an application for stay of the order of the learned Single Judge. Notice of the appeal was issued and the hearing before the GRC was stayed, more so in the light of the fact that the respondents / writ petitioners in the meanwhile had already been declared as a wilful defaulter by another Bank. Though, in the light of the same, we enquired from the counsels, whether not the appeal had become infructuous, inasmuch as it matters not, whether a person is classified as a wilful defaulter by one Bank / FI or by more than one Bank / FI but on the contention of all the counsels that the issue involved is of general importance and is likely to arise in future as well, we proceeded to hear the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s concerned specifically recognise such a right and provide for such a representation; the reasons given in that case for permitting representation, of the misappropriated amount being very large, number of documents and witnesses being numerous and workman being not able to get assistance of any other able co-worker, were held to be irrelevant; (D) D.G., Railway Protection Force Vs. K. Raghuram Babu (2008) 4 SCC 406 also laying down that ordinarily in a domestic / departmental enquiry, the person accused of misconduct has to conduct his own case, inasmuch as, such an inquiry is not a suit or criminal trial where a party has a right to be represented by a lawyer and that it is only if there is some rule which permits the accused to be represented by somebody else that such a right can be claimed; (E) A.S. Motors Private Limited Vs. Union of India (2013) 10 SCC 114, in the context of hearing in pursuance to a show cause notice issued prior to termination of contract, holding that there was no need to give an opportunity to cross-examine, as the inquiry was primarily in the realm of contract, aimed at finding out whether the noticee had committed any violation of the contractua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Procedure, 1973 (CrPC) conferring the right to be defended by a pleader of his choice to any person accused of an offence before a Criminal Court or against whom the proceedings are instituted under the CrPC; (however, we had pointed out that the same can have no application as the GRC does not accuse the person proposed to be declared as wilful defaulter of any offence and does not prosecute him and Clause 2.5(b) supra of the Master Circular merely provides that against wilful defaulters, criminal proceedings may be initiated, if necessary); (V) attention was invited to Clause 4.3 of the Master Circular providing that it should also be ensured that the penal provisions are used effectively and determinedly but after careful consideration and due caution and advising the Banks / FIs to put in place a transparent mechanism for initiating criminal proceedings based on facts of each case and it was argued that for the sake of complete transparency also, representation through an Advocate is necessary; (VI) attention was invited to Clause 3 of the Master Circular aforesaid providing that the GRC should comprise of the Chairman and Managing Director and two other senior officials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to appear on their behalf before the Courts and Tribunals in which they have cases and in the light thereof, there appeared to be no justification for not bringing into force Section 30 of the Advocates Act; (b) N.K. Bajpai Vs. Union of India (2012) 4 SCC 653 and invited attention to paras 20, 21, 24 to 27, 36, 38 and 70 thereof and contended that in the present case, the RBI has not deemed it expedient to bar the appearance of Advocate in the hearing provided for to the person sought to be declared as a wilful defaulter; (c) DLF Qutub Enclave Complex Educational Charitable Trust Vs. State of Haryana (2003) 5 SCC 622 to, by analogy, contend that bar cannot be implied and must be express; (d) Santanu Ghosh Vs. The State Bank of India 2013 SCC Online Cal 11603 holding that considering the severe consequences that befall a person upon being found to be a wilful defaulter, the function of the GRC is more quasi-judicial than administrative and finding the order of GRC same to be not stating any reason, setting aside the same; (e) India Photographic Company Ltd. Vs. Saumitra Mohon Kumar alias Saumitra Kumar 1983 SCC Online Cal 156 holding that no general rule can be laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce, it was held that an Inquiry Officer in a departmental enquiry is not a Tribunal. Notice was also taken of the fact that in British India there is no common law right in a party to be represented by counsel and that if the client is expressly denied the privilege of being heard by a counsel, the Advocate‟s right of audience would be also excluded. Attention was also invited to para 10.033 of Volume 2 of Halsbury‟s Laws of India, 1999 Edition, summarising that the right to practice granted by the Advocates Act does not confer on a litigant the right to be represented by an Advocate. It was further argued that India Photographic Company Ltd. supra relied upon by the respondents / writ petitioners is contrary to the law laid down by the Supreme Court. To answer our query, whether a lawyer could appear before the GRC as an agent of the noticee, reference was made to Chapter X on Agency in Pollock Mulla‟s The Indian Contract and Specific Relief Acts, 14th Edition (on the basis of K.K. Khadilkar Vs. Indian Hume Pipe Co. Ltd. AIR 1967 Bombay 521) opining that right of audience before a Tribunal cannot be delegated to an agent. It was further contended that DLF Qutu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h borrower. Not only would such a borrower be deprived of credit facilities from banks and financial institutions but is likely to be also deprived of credit from any other person with whom it may be having financial / commercial dealings. The suppliers of goods and raw materials to such borrowers would stop supplying goods and raw materials on credit and would insist upon delivery against payment. Not only so, such declaration as a wilful defaulter, which is put in public domain, is also injurious to commercial goodwill and reputation of the borrower, likely to make anyone weary of dealing with the borrower. All this is likely to lead to cessation of the business of such a borrower. (B) Supreme Court in Kotak Mahindra Bank Ltd. Vs. Hindustan National Glass and Ind. Ltd. (2013) 7 SCC 369 has held that the purpose of the Master Circular is to caution banks and financial institutions from giving any bank finance to a wilful defaulter. It was held that credit information could not be confined to only wilful defaults made by existing borrowers of the bank but would also cover constituents of banks who had defaulted in their dues under banking transactions with banks and who intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer, during the opportunity provided to represent thereagainst and of hearing would axiomatically be required to meet and rebut the evidence on the basis whereof and the reasons for which the high level committee of the Bank has concluded that the borrower be declared as a wilful defaulter. Resultantly, the GRC would be required to consider and weigh the evidence and the reasons on the basis of which the bank has arrived at the decision vis-a-vis the rebuttal evidence and arguments of the borrower and thereafter take a view. The proceedings before the GRC are thus not inquisitorial as in the case of departmental proceedings supra but are rather adversarial and the decision of GRC is final, against which no remedy is provided as distinct from the report of inquiry officer in departmental proceedings validity whereof can be challenged in a industrial dispute. The judgments relating to departmental proceedings cited by the counsel for Bank thus have no applicability to the proceedings before GRC. (F) The Master Circular also defines wilful default and then proceeds to define the ingredients of wilful default. It further provides that the decision, whether a particular instance amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract is subject to judicial review on the touchstone of fairness, relevance, natural justice, non-discrimination, equality and proportionality. (I) In our view the above parameters would be applicable to the declaration under the Master Circular of a borrower as a wilful defaulter also. Just like the State and its instrumentalities cannot refuse to enter into a contract with a private party without giving such private party an opportunity of being heard and which hearing has to satisfy the criteria of fairness, similarly the banks and FIs cannot by declaring a borrower as wilful defaulter deprive the borrower of credit / banking facilities from all Banks / FIs by though giving a hearing but without the element of fairness therein. (J) Supreme Court in Smt. Kavita Vs. State of Maharashtra (1981) 3 SCC 558 reiterated in Nand Lal Bajaj Vs. State of Punjab (1981) 4 SCC 327 emphasized that adequate legal assistance is essential for the protection of Fundamental Rights guaranteed by the Constitution and valuable rights may be jeopardised and reduced to mere nothing without adequate legal assistance in the light of the intricacies of the problems involved and other relevant fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by such lawyers and to not allow a business house / a company which instead of maintaining its own legal department relies on external professionals therefor would in our opinion amount to discrimination not based on any reasonable criteria and not having any rationale nexus to the object sought to be achieved. (O) The way in which businesses are conducted and transacted today has also undergone a drastic change. Today, we have companies who are marketing and selling goods worth crores of rupees but who are not manufacturers of such goods and may not themselves have title or custody of the said goods at any point of time. Such companies may not have any tangible assets even and being purely e-commerce companies may not have a large workforce also. In our view, prohibiting representation before GRC through professionals would also unduly prejudice such companies vis-a-vis the old fashioned brick and mortar companies employing a workforce of thousands. (P) We cannot also be unmindful of the fact that notwithstanding the bar contained in the Industrial Disputes Act, 1947, practicing advocates have continue to appear before the Labour / Industrial Court save for the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interpretation 12th Edition 2010 authoring that the word or is normally disjunctive. This was reiterated in Spentex Industries Ltd. Vs. Commissioner of Central Excise MANU/SC/1142/2015. It was so held earlier also in Guru Nanak Dev University Vs. Sanjay Kumar Katwal (2009) 1 SCC 610. Thus the existence of the word or between the words Tribunal and person in Clause (ii) of Section 30 supra is indicative of the words legally authorized to take evidence qualifying the word person only and not the word Tribunal . (X) Though the counsel for the respondents, from Clause 3(ii) of the Master Circular requiring the decision taken on classification as a wilful defaulter to be well documented and supported by requisite evidence contended that the GRC is authorized to take evidence but we find the words legally authorized to take evidence‟ meaning, authorized to compel presence of any person as a witness and which we do not find the GRC to be authorized to. It thus cannot be said that the GRC is legally authorized to take evidence. (Y) The only question which thus remains for consideration to attract the applicability of Section 30 supra is, whether the GRC can be ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act judicially upon an authority does not necessarily clothe the authority with the judicial power of the State as even administrative or executive authorities are required to act judicially in dealing with questions affecting the rights of citizens. It was further explained that in deciding whether an authority required to act judicially would be regarded as a Tribunal or not the principle incident is the investiture of a trappings of a Court such as authority to determine matters in cases initiated by parties, sitting in public, power to compel attendance of witnesses and to examine them on oath and duty to follow fundamental rules of evidence, provision for imposing sanctions by way of imprisonment, fine, damages or mandatory or prohibitory orders to enforce obedience to their commands. (DD) In Associated Cement Companies Ltd. Vs. P.N. Sharma AIR 1965 SC 1595, Justice R.S. Bachawat in his concurring judgment held that an authority other than a Court may be vested by a statute with judicial power in widely different circumstances and the proper thing is to examine and ascertain whether the powers vested in the authority can be truly described as judicial functions or judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt i.e. the authority to determine whether the Bank‟s/FIs proposal to classify a borrower as a wilful defaulter is in accordance with the requirements of the Master Circular and if so satisfied, to declare the borrower as a wilful defaulter and which declaration vitally affects the rights and reputation of the person so declared. Not only does the Master Circular so provide but we have already noted above the dicta of the Supreme Court in Kulja Industries Limited supra holding that the hearing in this regard has to satisfy the requirement of fairness. (II) Supreme Court in Anshuman Shukla supra was concerned with the Arbitral Tribunal constituted under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 to resolve the disputes and differences pertaining to works contract or arising out of or connected with execution, discharge or satisfaction of any such works contract. The said Arbitral Tribunal was held, for all intent and purport to be a Court having been constituted to determine a lis between the parties. The contention that the determination by the Arbitral Tribunal was an administrative adjudication as distinct from judicial adjudication was rejected. It was h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e right to practice the provision was negatived only on the ground of Section 30 of the Advocates Act having not been brought into force and though it was observed such a right is no doubt conferred thereby. (QQ) It thus follows that the restriction placed by the GRC of the appellant banks to appearance on behalf of borrowers of advocates before it, not by any law but otherwise, cannot be sustained and has to be held to be bad. (RR) We are also of the view that the entire opposition of the GRC of the appellant banks to appearance of is based on an illogical presumption of the same delaying the proceedings before it. We do not find any basis for such apprehension. There is no basis for the Bank / FIs to form an opinion that while the defaulting borrower and / or his representatives would not delay the proceedings, an advocate appearing for them would. Moreover the members of GRC can always control and guide the proceedings before it and as per the exigencies limit the time of hearing. (SS) We therefore conclude that the GRC of the appellant banks erred in denying representation through the advocates to the respondent. We further hold that the borrowers or the Banks/FIs who ..... X X X X Extracts X X X X X X X X Extracts X X X X
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