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TMI Blog2024 (3) TMI 991X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned Show-cause Notice. 3. The premise of the Show-cause Notice is a purported classification of the account of the petitioner no. 1 as a Non-Performing Asset (NPA) with effect from December 27, 2020. However, in a writ petition preferred against such classification, bearing WPO No. 1440 of 2023, this Court restrained the respondent by an order of injunction from proceeding on the premise of, or giving effect to, the impugned proposal for sale of NPAs on the premise that the classification of the petitioner no. 1's account as NPA was patently de hors the relevant RBI Circulars issued during the Covid-19 pandemic. 4. Hence, the said classification could not be a basis of the issuance of the show cause. 5. After such classification of NPA, the respondent-bank took out an application under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016 which was rejected. 6. The respondent-bank also initiated a proceeding for recovery of dues against the petitioners which is pending before the Debts Recovery Tribunal. 7. The respondent has, further, issued a Notice under Section 13(2) of the SARFAESI Act but as yet not taken measures under Section 13(4) of the said Act, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 30, 2020, no repayment whatsoever has been made till date. Thus, the petitioners cannot deny that they are wilful defaulters. 16. Learned counsel for the respondent-Bank cites P. Mohanraj and others Vs. Shah Brothers Ispat Private Limited, reported at (2021) 6 SCC 258, where the Supreme Court, while considering the respective provisions of moratorium under the IBC, observed that Section 14 was wider than Sections 81, 85, 96 and 101. Thus, a moratorium under Section 14 cannot be equated with one under Section 96 of the IBC. 17. Learned counsel also cites a judgment of this Court in Gouri Prasad Goenka Vs. State Bank of India, reported at 2021 SCC OnLine Cal 1942, where it was held that a wilful defaulter proceeding does not come within the contemplation of Section 14 of the IBC. 18. The two judgments, read in conjunction, clearly denote that if a wilful defaulter proceeding does not come within the wider purview of Section 14 of the IBC, Section 96 of the same cannot be a bar to such a proceeding. 19. Learned counsel for the Bank next argues that the assets of the petitioners were disclosed on the premise that the petitioner nos. 2 to 9 are guarantors of the borrower, whose l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins overdue for the stipulated 90 days, the question of NPA classification arises. Thus, for holding a borrower to be a defaulter, the subsequent NPA classification is irrelevant. There is a different Circular of the RBI which governs the classification of accounts as NPA. Thus, it may very well be that a borrower becomes a defaulter and is declared to be a wilful defaulter upon the criteria of the Wilful Defaulter Master Circular being satisfied, even without classification of the account as NPA. 27. In the present lis, even if the best case of the petitioners is taken into consideration, applying the Pandemic Circulars of the RBI extending the time for making good defaults, on and from November 30, 2020, the petitioner no. 1 was a defaulter. Apparently, no repayment has been made since then. Thus, it cannot be said that merely because the NPA classification is clouded in a writ petition, the respondent-Bank cannot proceed with the wilful defaulter proceeding. 28. However, it is made clear that the purported communications of the petitioners handed over by the Bank at the time of arguments cannot be looked into at this stage, having not been referred to in the Show-cause Notice. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requirements of the Master Circular but is required merely to outline the broad spectrum of offences committed by the borrower, its Directors and the guarantors to be labelled as wilful defaulters. The proper stage for consideration of compliance of Clause 2.6 on all other aspects is the order passed by the Wilful Defaulter Identification Committee on consideration of the Show-cause Notice and the reply thereto. Hence, the merits of the said allegation cannot be considered in detail. 33. The same principle applies to the other components of allegations made in the Show-cause Notice. Sufficient ingredients to justify the allegations have been spelt out in the Show-cause Notice to bring the same within the broad purview of the Master Circular. The said ingredients, read in conjunction with the FAR and other documents which may be relied on by the Bank, are to be taken in conjunction at the time of consideration by the Wilful Defaulter Identification Committee and not at the show-cause stage. The composite effect of the documents and the broad allegations made in the Show-cause Notice are the subject-matter of adjudication by the said Committee, and thereafter the Review Committe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra), the Supreme Court has repeatedly highlighted, particularly in paragraph nos. 35.2 and 35.3, that the moratorium concerns not merely recovery of debt but any legal proceeding even indirectly relatable to recovery of any debt. Hence, the moratorium applies to recovery proceedings and proceedings which directly or indirectly "relatable" to such recovery. A wilful defaulter proceeding cannot, by any stretch of imagination, be said to be even remotely relatable to recovery of debt but is merely an off-shoot of the debt. The corpus of debt is not the subject-matter of a wilful defaulter proceeding, unlike a recovery proceeding, but is a mere stimulus to spur the wilful defaulter proceeding into motion. 41. The yardsticks of declaration of wilful defaulter under the Master Circular are different from a recovery proceeding or a relatable proceeding; such declaration is merely to disseminate credit information pertaining to wilful defaulters for cautioning banks and financial institutions so as to ensure that further bank finance is not made available to them. Thus, the argument of the petitioners that the pendency of a proceeding under Section 95, IBC automatically entails a moratori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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