Declared willful defaulter, petitioner challenges SBI’s decision

Hyderabad: Justice S. Nanda of the Telangana High Court allowed a writ petition filed by Ritesh Kumar and others challenging the action of the SBI in declaring them wilful defaulters. The petitioners, promoters of Rajvir Industries, said the SBI had moved an application for an insolvency resolution process against the company. The bank also issued a showcause notice citing the petitioner as a wilful defaulter as determined by an identification committee. The petitioner sought a copy of the forensic audit report, which was refused as being confidential. It was the case of the petitioner that being declared wilful defaulter was a matter of serious civic consequence and the procedure followed by the bank was in utter violation of the petitioner’s fundamental rights. It was further the case of the petitioners that they did not receive any order issued by the wilful defaulter review committee, which did not apply its mind independently. Referring to the verdict of the Supreme Court in a similar matter, Justice Nanda echoed the observations of the apex court which had said “declaration of account as fraud observed that principles of natural justice demand that the borrowers must be served a notice given an opportunity to explain the findings in the forensic audit report (FAR) before the account is declared as fraud. This indicates that the forensic audit report must be necessarily supplied to the borrower prior to declaring an account as fraud. This court in principle opines that the same principles of natural justice need to be necessarily followed prior to declaring the petitioners as defaulters or willful defaulters and the petitioners should be furnished with a copy of the FAR.”