Writ Jurisdiction Against 'Wilful Defaulter' Declaration By Identification Committee Attracted Only In Case Of Patent/Gross Illegality: Calcutta HC [Read Judgment]

The Calcutta High Court has ruled that Courts, in exercise of their writ jurisdiction, can intervene on a declaration of Wilful Defaulter in the first instance only where the limited grounds of patent malafide, arbitrariness, bias or abuse of the process of law by the Identification Committee are established."The fast-track scheme of the relevant legislation and RBI guidelines operating in the field would be frustrated if the courts interfere at the drop of a hat in every case of probable mistake, even if the same requires a thread-bare scrutiny to establish", the court explained. Noting that the grounds for declaration of wilful defaulter relied on by the Identification Committee were legally tenable, being in consonance with the RBI Master Circular on Wilful Defaulters of July 1, 2015, the bench held that "a threadbare analysis thereof, on a reconsideration of documents or consideration of fresh documents at this stage, requiring a detailed enquiry dependent on re-appreciation of evidence, is entirely beyond the scope of the writ court and could at best be addressed by the review committee".The bench of Justice Sabyasachi Bhattacharyya was considering the challenge against the decision of the Wilful Defaulter Identification Committee (WDIC) of Allahabad bank, dated July 3, 2019, by which the petitioners were declared to be 'Wilful Defaulters', as well as the preceding show cause notice dated April 6, 2019 and the communication regarding such declaration to the petitioner, dated January 18, 2020. The Court noted that in the present case, the decision of the first committee, that is the WDIC, can be reviewed by the second, that is, the WD Review Committee. Such recourse is particularly open to the aggrieved borrower on questions of law and in some cases on legal or mixed questions as well. The bench concluded that in the present case, there does not appear to be such patent mala fide, arbitrariness, bias or abuse of the process of law by the WDIC as may attract judicial intervention. The Court said that the declaration of the petitioners as wilful defaulters, in the present case dated July 3, 2019, was backed by sound and feasible reasoning, which "may not, arguably, be fool-proof to an elaborate enquiry befitting a civil suit" but was "sufficiently reasonable, keeping in mind that it was merely the initial step in fixing responsibilities to curtail shady transactions and conduct which eat into the precious little commerce generated by the country". The bench further appreciated that the declaration was also preceded by a proper show cause notice dated April 6, 2019, which was fully in consonance with the guidelines provided in the RBI Master Circular dated July 1, 2015. The grounds stated in the show cause notice cannot be said to have traversed de hors the specific provisions, particularly Clause 3, of the said guidelines which furnish the indicators for arriving at a finding of wilful defaulter. The bench was alive to the fact that several extensions of time were granted as per the petitioners' prayers on more than one occasion, of which the petitioners failed to take benefit. On one pretext or the other, the petitioners have been biding time, thereby adopting dilatory tactics to stall their declaration as wilful defaulters. Opportunities galore were afforded by the WDIC to the petitioners for giving representation against the decision of the first committee and even for personal hearing. The petitioners deliberately did not avail of those, but chose to rely on technical pivots, like the delay in communication of the decision and non-consideration of their delayed reply. "However, enough justification for the purported delay in communication, between the date of the decision (July 3, 2019) and its communication to the petitioners (January 18, 2020), being provided by the pendency of the previous litigation. In any event, there is no statutory bar in late communication, provided sufficient opportunity is given to the borrower before and after the decision to redress any grievance. Such opportunities were afforded to the present petitioners in the instant case", the bench observed. The other question raised by the petitioners was the non-acceptance of the reply to the show cause notice due to delay as, according to the petitioners, there is no statutory time-limit to file such reply. "However, the process of declaration of wilful defaulter is not a mechanical process where the WDIC has no power to restrict the time for giving such reply. In fact, in the present case, more than sufficient time was granted to the petitioners, acceding to their request for inspection of documents as well. Time is the essence of the wilful defaulter declaration process, due to the commercial nature of the allegations which add up to make the entire economy porous and non-viable for business, which generates jobs as well. The banks' money is public money, which cannot be blocked for an indefinite period on the whims...

Writ Jurisdiction Against 'Wilful Defaulter' Declaration By Identification Committee Attracted Only In Case Of Patent/Gross Illegality: Calcutta HC [Read Judgment]

Mehal Jain

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