Wilful Defaulter Declaration – HC Sets Aside Bank Notice

Case Details: Ankit Bhuwalka v. IDBI Bank Ltd. - [2025] 174 taxmann.com 397 (HC-Bombay)

Judiciary and Counsel Details

• Revati Mohite Dere & Dr. Neela Gokhale, JJ.
• Simil Purohit, Sr. Adv., Ms Supriya Majumdar & Rishabh Chandra, Advs. for the Petitioner.
• Prakash Shinde, Harsh Sheth, Ms Niyati Merchant & Mohamedali M. Chunawala, Advs. for the Respondent.

Facts of the Case

In the instant case, CIRP was initiated against a company. The Transaction Audit Report (TAR) was prepared by auditors at the behest of the corporate debtor’s Resolution Professional (RP).

Based on TAR findings, RP filed an application before the NCLT, alleging that certain fraudulent transactions, including related-party transactions between the corporate debtor and its group company, had taken place. Relying solely on TAR, the respondent bank proceeded to declare the petitioner a wilful defaulter.

The petitioner filed a petition seeking quashing of the show cause notice issued by the bank and the order passed by the bank’s Wilful Defaulter Committee on the ground that he was deprived of a substantial opportunity to be heard. The documents based on which the decision to declare him a Wilful Defaulter was taken were not provided to him, and the report relied upon by the respondent was held by the NCLT to be based on surmises and conjectures.

It was noted that without providing the required documents or replying to the petitioner’s request, WDC decided to declare the petitioner a willful defaulter. Further, a personal hearing could not be construed to be meaningful with the petitioner having his hands tied behind his back in the context of the respondent withholding necessary documents and expecting to offer his comments.

High Court Held

The High Court held that the show cause notice and orders passed by the bank were to be set aside. However, the bank was at liberty to issue a fresh show cause notice to the petitioner by properly disclosing the material and information on which the show cause notice was based.

List of Cases Reviewed

• State Bank of India v. Jah Developers Pvt. Ltd. & Ors, (2019) 6 SCC 787, (para 29)
• Mrinmayee Rohit Umrotkar v. Union of India & Ors., (para 30), distinguished.

List of Cases Referred to

• Milind Patel v. Union Bank of India & Ors. 2024 SCC Online Bom 745 (para 11)
• State Bank of India v. Jah Developers Pvt. Ltd. & Ors. (2019) 6 SCC 787 (para 11)
• Kotak Mahindra Bank v. Hindustan National Glass & Ind. Ltd. (2013) 7 SCC 369 (para 11)
• Hindustan National Glass Ind. Ltd. v. Reserve Bank of India 2009 SCC Online Cal 2112 (para 11)
• Vishambhar Saran & Anr. v. CBI & Ors. 2024 SCC Online Cal 4978 (para 11)
• State Bank of India & Ors. v. Rajesh Agarwal & Ors. (2023) 6 SCC 1 (para 11).