Petitioner Falls Under RBI’s Wilful Defaulters for Failing to Make Default Good Despite Bank’s Claim u/s 13(4) of SARFAESI | HC

Case Details: MKN Investment (P.) Ltd. v. State Bank of India - [2025] 171 taxmann.com 202 (Calcutta)

Judiciary and Counsel Details

• Sabyasachi Bhattacharyya, J.
• Mainak Bose, Sr. Adv., Rishabh Karnani, Pranav Sharma, Advs. for the Petitioner.
• Joy Saha, Sr. Adv., Anirban Pramanik, Punarbasu Nath, Ms Bhaggasree Dey, Advs. for the Respondent.

Facts of the Case

In the instant case, MKN Investment (P.) Ltd. (the petitioner) was a personal guarantor for a loan taken by EMC Limited, the principal borrower, from a consortium of banks led by the State Bank of India (SBI). The principal borrower defaulted on loan repayment, triggering proceedings under the Master Circular for Declaration of Wilful Defaulters issued by the Reserve Bank of India (RBI) on 1-7-2015.

The Wilful Defaulter Identification Committee (IC) declared the borrower, its Managing Directors, and the petitioner as Wilful Defaulters, a decision later upheld by the Review Committee (RC). The petitioner challenged this classification through a writ petition, which was dismissed, leading to an appeal before the Division Bench.

The petitioner argued that, as a personal guarantor, it was entitled to protection under Clause 2.6 of the Master Circular, which required the bank to make a demand before classifying a guarantor as a Wilful Defaulter. The petitioner further contended that its secured assets had been sold under Section 13(4) of the SARFAESI Act, which deprived it of the financial ability to meet the debt obligations. However, the respondents (SBI) countered that the petitioner had sufficient means at the time of default but chose not to comply, thereby justifying its classification as a Wilful Defaulter.

High Court Held

The Calcutta High Court observed that the petitioner had failed to raise these arguments during the original writ proceedings, despite having ample opportunity before both the IC and RC. The court further noted that allowing a review petition to introduce new arguments would set a dangerous precedent and amount to an abuse of the review jurisdiction. Additionally, since the petitioner’s financial means at the time of default were sufficient, its refusal to meet debt obligations fell within the ambit of Clause 2.6 of the Master Circular.

Accordingly, the review petition was dismissed, affirming that the petitioner remained a Wilful Defaulter and reinforcing the principle of finality of judicial orders.