Delhi High Court Sets Aside Banks' Decision To Declare Ratul Puri As Wilful Defaulter Under RBI Master Circular

The Delhi High Court has quashed the decision of Bank of Baroda and Punjab National Bank declaring businessman Ratul Puri as a “wilful defaulter” under the Master Circular on Wilful Defaulters, 2015, issued by the Reserve Bank of India.

Puri is the Chairman of Hindustan Power Projects Private Limited. The banks declared him as a wilful defaulter with respect to his association in another company, Moser Baer Solar Limited, as a result of which he was deprived from availing credit facilities for his prospective business enterprises.

Justice Purushaindra Kumar Kaurav set aside the order passed by Bank of Baroda's Review Committee on March 23 last year that confirmed the order passed by its Identification Committee declaring Ratul Puri as a Wilful Defaulter.

The court also set aside a similar order passed Punjab National Bank's Review Committee on April 20 last year, declaring Puri as well as his mother, Nita Puri, as a wilful defaulter.

It said that the reasons assigned in the impugned orders were unsustainable and allowed the pleas moved by the Puris.

The court held that identification of a wilful defaulter has to be made keeping in view the track record of the borrower and not on the basis of isolated transactions or incidents.

“It is required to be ensured that solitary or isolated instances are not made the basis for imposing the penal action under the Master Circular. This requirement is cast in the Master Circular with an object to punish those borrowers who have not acted bonafidely in the interest of the business enterprise but made a concerted effort to divert borrowed funds,” the court said.

It added that the banks in question were obligated to reflect upon the entire track record of Moser Baer Solar Limited, and then conclude whether there existed events of Wilful Default and not on the basis of isolated transactions or incidents.

Justice Kaurav said that it is incumbent upon bank, who are dealing with public funds and discharging a public duty, to make appropriate enquiries as to whether a borrower is in genuine financial difficulty or whether there exist events of fraud and malfeasance.

“If the lender banks find fraud or malfeasance, the CDR-EG must either refuse CDR completely or impose such additional onerous conditions as provided in the CDR Scheme itself,” the court said.

Counsel for Petitioners: Dayan Krishnan, Senior Advocate with Mr. Vaibhav Mishra, Mr. Karan Batura, Mr. Ekansh Mishra and Mr. Jayant Chawla, Advocates

Counsel for Respondents: Mr. Chinmoy Pradip Sharma, Senior Advocate alongwith Mr. Kush Sharma, Standing Counsel and Mr. Nishchaya Nigam, Advocate (for Bank of Baroda); Mr. Sanjay Bajaj alongwith Mr. Shivam Takkar and Mr. Sarthak Sehgal, Advocates (for Punjab National Bank)

Title: RATUL PURI v. BANK OF BARODA and other connected matters

Citation: 2024 LiveLaw (Del) 250

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