TMI Blog2020 (2) TMI 1616X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Judge of this court in W.P. 1400 (W) of 2019. The writ petition at the instance of the respondents 1 and 2 in the appeal (hereinafter the writ petitioners) succeeded, leaving the respondents in the writ petition (hereinafter the appellants) aggrieved. 3. It is not in dispute that the writ petitioners happen to be the directors of M/s. Ashoka Multiyarn Mills Ltd. (hereinafter the company). A notice dated 15th July, 2017 was issued to the company by the Deputy General Manager, appellant no.2, conveying that the company owed the Bank, appellant no.1, in excess of ₹ 2442.35 lakh and that it had been decided to classify the company as a wilful defaulter because of the two reasons mentioned therein. An opportunity was given to the company to raise objection, if any, within fifteen days of receipt of the notice, failing which it was threatened that the matter would be reported to the Credit Information Companies for further action. The said notice dated 15th July, 2017 was followed by separate notices dated 3rd January, 2018, issued by the appellant no.2, calling upon the writ petitioners to attend a meeting before the Committee constituted by the appellant no.1 to identify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant no.1, without authority of law, vitiated the entire proceedings. 7. The contention raised on behalf of the appellants before the learned Judge that it is not necessary, in terms of the master circular, that the identification committee itself issues the show-cause notice, was overruled. In support of setting aside the show-cause notice and granting liberty to the appellants to take further steps in accordance with the master circular, the learned Judge assigned the following reasons : The power given to the Wilful Defaulter s Committee to issue the show-cause notice and decide on the issue cannot be delegated. It is so, not only because of the language used in the provisions of the Wilful Defaulter Master Circular but also by reason of the mechanism provided in the Master Circular for identification of a wilful default, the requirement to have a decision informed with reasons taken by a Committee constituted by the persons designated in the Master Circular. The Master Circular requires adherence to the principles of natural justice by the Wilful Defaulter s Committee. It requires the Committee to issue the show cause notice, allow a reply to be filed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit 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. 13. What we find from the decision of the identification committee (forming part of the supplementary affidavit filed by the appellants) is that in its meeting held on 29th June, 2017, a list of defaulting borrowers had been placed before it together with the conclusions arrived at by the regional offices of the appellant no.1 that 138 accounts could be declared as fraud accounts. This was supported by recommendations of the regional offices that such account holders warrant declaration as wilful defaulters. The identification committee looked into the list, the relevant facts as well as the recommendations and proposed to declare the listed borrowers as wilf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are conceived in the interest of the borrower. 18. In paragraph 3 of the master circular, one would find a reference to the pronoun it . Such pronoun ordinarily has to be read keeping in mind the noun preceding it, i.e., the Committee. The learned Judge literally read the provision and held that the identification committee is the sole repository of power to issue a show-cause notice. As can be discerned from the master circular, it is the primary duty of the identification committee to identify wilful defaulters and power in that behalf has been conferred on it. If indeed the power of the identification committee to identify and then declare a borrower as a wilful defaulter is delegated to some officer, such action would incur the wrath of the Court and not withstand judicial scrutiny. 19. 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at an opportunity to show cause and an enquiry simulating judicial standards have to precede the exercise thereof. It is well-recognised that a statutory functionary exercising such a power cannot be said to have delegated his functions merely by deputing a responsible and competent official to enquire and report. That is the ordinary mode of exercise of any administrative power. What cannot be delegated except where the law specifically so provides - is the ultimate responsibility for the exercise of such power. *** 22. This short but instructive passage is of immense worth. It makes a distinction between exercise of the ultimate power and the powers that are ancillary to such exercise of the ultimate power, as well as judicial power and administrative power. 23. Exercise of power under the master circular obviously is not exercise of judicial power but an administrative power. The proceeding of the identification committee for identifying and declaring a borrower as a wilful defaulter is essentially a fact-finding exercise, followed by an administrative decision. The position in law obviously is that the identification committee does not decide any lis. The tentative dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards initiation of disciplinary action against an employee) is required to be issued by the disciplinary authority, it is not the law that if the charge-sheet is not issued by the disciplinary authority, the proceeding would stand vitiated. If the chargesheet is issued by an officer/authority subordinate to the disciplinary authority but holding a position higher than the charged officer, such initiation cannot be held to be in violation of the statutory rules and hence, illegal. If any authority is required, we may profitably refer to the decision of the Supreme Court reported in (2012) 11 SCC 565 [The Secretary, Ministry of Defence Ors. vs. Prabhash Chandra Mirdha]. There, the respondent delinquent challenged the charge-sheet on the ground that it had been issued by an authority not competent to do so. Such contention did not find favour of the Court. Passages therefrom, to the extent relevant for a proper decision on this appeal, are quoted below : 4. The legal proposition has been laid down by this Court while interpreting the provisions of Article 311 of the Constitution of India that the removal and dismissal of a delinquent on misconduct must be by the authority not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he is found deficient, and what would be the consequences of a failure to satisfactorily explain, so that he can raise effective defence while the show-cause notice is carried forward to its logical conclusion. It is one of the basic postulates of the due process of law that a party who is sought to be proceeded against must know, what the allegations against him are, and what the evidence likely to be used against him is so that natural justice is not observed in the breach and also that a fair opportunity is extended. Apart from alleging that the appellant no.2 had arrogated to himself the jurisdiction to issue the show-cause notice in contravention of the master circular, there is not a single pleading as to how the writ petitioners stood prejudiced by reason of issuance of the show-cause. 31. It has been held by the Supreme Court in the decision reported in (2007) 13 SCC 270 [Union of India Ors. vs. Vicco Laboratories] that a strong case of abuse of process of law has to be set up in order to succeed on a challenge to a showcause notice. Mere assertion by the writ petitioner that the notice was issued in abuse of process of law, would not suffice. It should be prima facie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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. 36. In such view of the matter, we hold that the learned Judge was not justified in interfering with the show-cause notice. We, therefore, set aside the impugned judgment and order and allow the appeal without any order for costs. 37. The writ petitioners are granted time till 31st March, 2020 to submit a comprehensive representation/objection for being placed before the identification committee constituted under paragraph 3(a) of the master circular. Needless to observe, the writ petitioners shall be entitled to take all points that are available to them in law in such repr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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