Declaration of wilful defaulter was set aside as review committee just endorsed a view of Identification Committee

  • Blog|FEMA & Banking|News|
  • |
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 22 October, 2021

Power of Reserve Bank to give directions

Case Details: Senthil Arumugasamy v. Deputy General Manager, State Bank of India - [2021] 131 130 (Madras)

Judiciary and Counsel Details

    • Sanjib Banerjee, CJ. and P.D. Audikesavalu, J.
    • Ms. Ananda Gomathy for the Petitioner. S. Sethuraman for the Respondent.

Facts of the Case

The State Bank of India sent a notice to many directors, including the petitioner of the borrower company that had acquired credit facilities in connection with its operations, in the instant case.

The Identification Committee of the Bank proceeded to consider the same and concluded that, inter alia the petitioner was liable to be labeled as a wilful defaulter. Said order was contained by Review Committee.

The petitioner, on the other hand, cites the Master Circular and the method set out therein as the mechanism for identifying willful defaulters. According to the petitioner, the subject had to be considered by both Committees, however, based on a reading of the Review Committee’s conclusion as conveyed by the bank to the petitioner, it appears that the Review Committee did not consider anything at all. Ironically, the petitioner emphasized the Master Circular’s obligation to a bank’s Identification Committee and the exercise of review to be conducted by its Review Committee.

High Court Held

The High Court of Madras ruled that after careful review of the master circular, both the Identification and Review committees will investigate the case, with the Review Committee making an independent assessment. It was also noted that when appellate judgments upholding the orders under appeal are issued, they may not go into great detail or even accept the grounds set forth in the challenged order. However, the appellate ruling must also show the appellate authority’s independent application of mind, otherwise, it will not qualify as the discharge of any adjudicatory duty.

In addition to the foregoing, the matter appears to be somewhat offensive and in derogation of the responsibility conferred on it by the Master Circular. There is nothing to indicate that any more mind was applied to the matters in issue or the assessment was undertaken with any degree of seriousness.

Since the Review Committee of the State Bank, in this case, does not appear to have applied its mind while assessing the correctness of the opinion rendered by the Identification Committee, the declaration of the petitioner as a wilful defaulter cannot be sustained and the same is set aside.

List of Cases Referred to

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Leave a Reply

Your email address will not be published. Required fields are marked *

Everything on Tax and Corporate Laws of India

Subscribe to our weekly news letters!

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied