Case Note & Summary
The petitioner, Mr. Milind Patel, filed a writ petition challenging his declaration as a wilful defaulter by Union Bank of India (Respondent No. 1). The petitioner had availed credit facilities from the bank, which were declared as non-performing assets. The bank's Wilful Defaulter's Identification Committee declared the petitioner a wilful defaulter. The petitioner submitted a representation to the Wilful Defaulter's Review Committee, but the Review Committee confirmed the declaration without granting a personal hearing and without passing a speaking order. The petitioner contended that this violated the principles of natural justice and the RBI Master Circular on Wilful Defaulters. The court examined the RBI Master Circular and found that it mandates a personal hearing by the Review Committee and a speaking order. The court held that the failure to provide a personal hearing and to consider the petitioner's representation vitiated the declaration. The court set aside the declaration and remitted the matter back to the Review Committee for fresh consideration, directing that a personal hearing be given and a speaking order be passed. The court also directed that the reporting of the petitioner as a wilful defaulter to credit information companies be kept in abeyance until the fresh decision.
Headnote
A) Banking Law - Wilful Defaulter - Declaration - Natural Justice - RBI Master Circular - The petitioner challenged his declaration as a wilful defaulter by Union Bank of India. The court held that the Review Committee failed to provide a personal hearing and did not consider the petitioner's representation, violating the principles of natural justice and the RBI Master Circular. The declaration was set aside and the matter remitted back for fresh consideration. (Paras 1-27) B) Banking Law - Wilful Defaulter - Review Committee - Personal Hearing - The court held that the Review Committee must provide a personal hearing to the borrower before confirming the wilful defaulter declaration, as mandated by the RBI Master Circular. The failure to do so vitiates the declaration. (Paras 15-20) C) Banking Law - Wilful Defaulter - Speaking Order - The court held that the Review Committee must pass a speaking order after considering the borrower's representation and the personal hearing. The absence of a speaking order renders the declaration unsustainable. (Paras 21-25)
Issue of Consideration
Whether the declaration of the petitioner as a wilful defaulter by the Wilful Defaulter's Identification Committee and the subsequent confirmation by the Review Committee without providing a personal hearing and without considering the petitioner's representation is valid and in accordance with the RBI Master Circular on Wilful Defaulters.
Final Decision
The court allowed the writ petition, set aside the wilful defaulter declaration, and remitted the matter back to the Review Committee for fresh consideration with a direction to provide a personal hearing and pass a speaking order. The court also directed that the reporting of the petitioner as a wilful defaulter to credit information companies be kept in abeyance until the fresh decision.
Law Points
- Natural justice
- Personal hearing
- Wilful defaulter
- Review Committee
- RBI Master Circular
- Show cause notice
- Opportunity of hearing
- Speaking order
- CIBIL reporting
