R.F. Nariman, J. - (1.) Leave granted.
(2.) The question that arises in the present appeals is whether, when a person is declared to be a wilful defaulter under the Circulars of the Reserve Bank of India ["RBI"], such person is entitled to be represented by a lawyer of its choice before such declaration is made.
(3.) The RBI Circular dated 01.07.2013 is described as a "Master Circular on Wilful Defaulters" ["Master Circular"] and is addressed to all scheduled commercial banks (excluding Regional Rural Banks (RRBs) and Local Area Banks (LABs)), and to All India Notified Financial Institutions. The purpose of the said Master Circular is stated as follows: "Purpose: To put in place a system to disseminate credit information pertaining to wilful defaulters for cautioning banks and financial institutions so as to ensure that further bank finance is not made available to them." Under this Master Circular, "wilful default" has been defined as follows: "2.1. Definition of wilful default The term "wilful default" has been redefined in supersession of the earlier definition as under: A "wilful default" would be deemed to have occurred if any of the following events is noted:- (a) The unit has defaulted in meeting its payment/repayment obligations to the lender even when it has the capacity to honour the said obligations. (b) The unit has defaulted in meeting its payment/repayment obligations to the lender and has not utilised the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes. (c) The unit has defaulted in meeting its payment/repayment obligations to the lender and has siphoned off the funds so that the funds have not been utilised for the specific purpose for which finance was availed of, nor are the funds available with the unit in the form of other assets. (d) The unit has defaulted in meeting its payment/repayment obligations to the lender and has also disposed off or removed the movable fixed assets or immovable property given by him or it for the purpose of securing a term loan without the knowledge of the bank/lender." The Grievance Redressal Mechanism is set out in paragraph 3 of the Master Circular as follows: "3. Grievance Redressal Mechanism Banks/FIs should take the following measures in identifying and reporting instances of wilful default: (i) With a view to imparting more objectivity in identifying cases of wilful default, decisions to classify the borrower as wilful defaulter should be entrusted to a Committee of higher functionaries headed by the Executive Director and consisting of two GMs/DGMs as decided by the Board of the concerned bank/FI. (ii) The decision taken on classification of wilful defaulters should be well documented and supported by requisite evidence. The decision should clearly spell out the reasons for which the borrower has been declared as wilful defaulter vis- -vis RBI guidelines. (iii) The borrower should thereafter be suitably advised about the proposal to classify him as wilful defaulter along with the reasons therefor. The concerned borrower should be provided reasonable time (say 15 days) for making representation against such decision, if he so desires, to a Grievance Redressal Committee headed by the Chairman and Managing Director and consisting of two other senior officials. (iv) Further, the above Grievance Redressal Committee should also give a hearing to the borrower if he represents that he has been wrongly classified as wilful defaulter. (v) A final declaration as 'wilful defaulter' should be made after a view is taken by the Committee on the representation and the borrower should be suitably advised.";