TMI Blog2020 (3) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... its effect and not reopening the merits of the declaration of wilful defaulters by the Identification Committee, since the same had already attained finality. As far as the subsequent event is concerned, the petitioners are justified in arguing that since the wilful default tag was attached to the petitioners merely in the capacity of the promoters and directors of the defaulting company, which itself had been absolved of such default, automatically removing its wilful defaulter tag, such tag could not be sustained thereafter. The petitioners were castigated as wilful defaulters only due to the alleged actions taken by them in commission of the default by PMPL. Hence, the term wilful default , even in respect of the petitioners, does not pertain to their general conduct as company officials but is restricted to the default committed by the company, of which they were promoters/directors - the Review Committee adopted a palpably erroneous legal process in taking the view that the petitioners and the company were individually labelled as wilful defaulters. The impact of the sustenance of such tag would be severely detrimental to the petitioners, more so in view of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 29, 2016. Vide order dated January 9, 2017, the Identification Committee on wilful defaulter passed an order, declaring the petitioners and PMPL as wilful defaulters. 4. Subsequently, upon moving this court, an order was passed by a coordinate bench on January 20, 2017, directing the Identification Committee to disclose the order passed classifying the account of PMPL as wilful defaulter, to be communicated within a week. 5. On January 24, 2017, a letter was addressed to the petitioners whereby the petitioners were informed that on January 9, 2017, the wilful defaulter Identification Committee had declared the company and its promoters and directors as wilful defaulters. 6. In subsequent writ petitions filed by the petitioners, challenging the declaration of wilful defaulter, such declaration was quashed by a learned Single Judge, inasmuch as the petitioners were concerned, by an order dated April 6, 2017. 7. On May 9, 2018, a Corporate Insolvency Resolution Process (CIRP) was started in respect of PMPL on the strength of an order of the National Company Law Tribunal, Kolkata Bench. 8. By the order dated April 6, 2017, the learned Single Judge had, inter alia, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the debts of the company were resolved, the petitioners moved a special leave petition before the Supreme Court and a division bench of the Supreme Court, vide order dated May 8, 2019, observed that the petitioners wished to make a representation to the Review Committee of the respondent no.2‐bank in the light of the subsequent events, on the issue that since the assets of PMPL had since been sold in liquidation of the company s debts by virtue of the corporate resolution, whether the classification of the petitioners as wilful defaulter should continue. The petitioners were permitted to make such representation within a limited period and the Review Committee under the Master Circular dated July 1, 2015 of the Reserve Bank of India would then decide the said representation and give its reasons in accordance with the judgment of the Supreme Court in the matter of State Bank of India vs. M/s Jah Developers Pvt. Ltd. [AIR 2019 SC 2854 = (2019) 6 SCC 787]. 13. Pursuant to such order of the Supreme Court, the petitioners filed a fresh representation before the Review Committee of the respondent‐bank on May 20, 2019. 14. The Review Committee, by an order dated Octob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny itself. The liabilities of the latter having been extinguished by virtue of the resolution, the petitioners could not be continued to be declared as wilful defaulters. 19. Learned senior counsel for the petitioners next argues that the Review Committee as well as the Identification Committee adopted erroneous legal principles in labelling the petitioners as wilful defaulters as well. It is argued on basis of the July 1, 2015 Circular that a unit was to be held a wilful defaulter. The expression unit separately included individuals, juristic persons and all other forms of persons enterprises whether incorporated or not, as per clause 2.12 of the Circular. In case of business enterprises, (other than companies), banks/financial institutions may also report in the director column of the annexure 1 thereto, the names of those persons who are in charge and responsible for the management of the affairs of business of the company. Such expressions are disjunctive. Hence, in case a company is declared to be wilful defaulter, the promoters/directors could not be incriminated for the same offence. 20. It is argued by the petitioners that in view of the petitioners last repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are concerned. The petitioners were, in their capacities as promoters and directors, liable for the offences on which the wilful default declaration was made and there was no reason why they should be absolved from such liability by the resolution of the company s loan. It is argued by learned senior counsel for the respondents that the petitioners subjected themselves to the Review Committee pursuant to the order of the Supreme Court, in terms of the Master Circular dated July 1, 2015. As such, the decision of the Review Committee is binding on them. 26. It is further argued that the petitioners were very much represented before the said committee and the objections of the petitioners were considered at length, both by the Identification Committee and the benches of this court which looked into the challenge thereto by the petitioners. In all fora, the courts affirmed the observations of the Identification Committee on merits. Hence, such question cannot now be reopened and the petitioners are debarred by the principle of res judicata from doing so. 27. The only altered circumstance before the Supreme Court for passing the order dated May 8, 2019, was the corporate resolu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that since the wilful default tag was attached to the petitioners merely in the capacity of the promoters and directors of the defaulting company, which itself had been absolved of such default, automatically removing its wilful defaulter tag, such tag could not be sustained thereafter. The petitioners were castigated as wilful defaulters only due to the alleged actions taken by them in commission of the default by PMPL. Hence, the term wilful default , even in respect of the petitioners, does not pertain to their general conduct as company officials but is restricted to the default committed by the company, of which they were promoters/directors. As such, it is a Dog in the Manger policy to sustain the tag wilful defaulter for the petitioners for a default which had been absolved by the corporate resolution. Whatever might have been the veracity of the allegations against the petitioners, they could not continue being labelled as wilful defaulters for a default which itself had been resolved. Thus, the Review Committee adopted a palpably erroneous legal process in taking the view that the petitioners and the company were individually labelled as wilful defaulters. The impa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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