Hear The Alleged Wilful Defaulter’s Side Before Taking Any “Drastic Measure”: Allahabad HC Directs IDBI [Read Order]

The Allahabad High Court recently directed the Industrial Development Bank Of India (IDBI) to consider the representation by an alleged “wilful defaulter” before taking any “drastic steps” against him.

The Bench comprising Justice B.Amit Sthalekar and Justice Rajiv Joshi ordered the bank to consider the representation by Mr. Sanjiv Aggarwal within a month, and also allow him an opportunity of personal hearing and filing of any documents. Mr. Aggarwal was represented by Advocate Anoop Trivedi, assisted by Advocates Abhishek Tripathi and Abhinav Gaur. The respondent bank was resented by Advocate Pranjal Mehrotra.

Mr. Aggarwal is a director of M/s Tirupati Inks Limited, which had availed financial assistance of more than 34 crores from Bank of Baroda, Punjab National Bank, Oriental Bank of Commerce, ICICI Bank, Syndicate Bank and IDBI by way of Consortium Lending led by Punjab National Bank.

On the company falling behind its payment schedule, IDBI served upon it a statutory demand notice under section 13 (2) of Securitisation and Reconstruction of the Financial Assets and Enforcement of Security Interest Act, 2002. These proceedings were initiated despite the pendency of a reference under Section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1986 before the Board for Industrial and Financial Reconstructions (BIFR).

Mr. Aggarwal had now challenged the validity of an order passed on August 6 by IDBI declaring him a “wilful defaulter” and directing his name to be included in the “List of Wilful Defaulters” maintained by Credit Information Bureau India Limited (CIBIL). He had also challenged another order passed by IDBI on September 15, directing publication of his name and photograph in newspapers and magazines, declaring him a wilful defaulter.

He had essentially contended that the impugned orders were passed without granting him any opportunity of being heard, in violation of the principles of natural justice. He had further submitted that the orders were passed in violation of the Master Circulars issued by the Reserve Bank of India providing that in cases of consortium lending by multiple banks, the consortium shall take unanimous decisions with respect to legal proceedings against the borrower, and a member bank cannot proceed independently without the approval of the other consortium members.

Mr. Aggarwal had therefore asserted that IDBI did not have any independent right against him as the financial assistance granted to the company was never given by it in its independent capacity.

In its order, the court noted that Mr. Aggarwal had submitted a representation to IDBI, requesting it to give him an opportunity to defend himself before the bank. Directing the bank to consider this representation and give him a personal hearing, the court ordered,

“We, therefore, think it appropriate that before any drastic measure is taken by the bank by virtue of the order dated 15.9.2018, the respondent bank should decide the petitioner's representation dated 6.10.2018 which was sent by registered post on the same date and also give him an opportunity of personal hearing.”

It further directed that the operation of the impugned orders shall remain in abeyance and shall be subject to the final order passed by the bank.