KINGFISHER AIRLINES LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) The writ petitioners were declared as wilful defaulters by the Grievance Redressal Committee on declaration of Wilful Defaulter of the United Bank of India by its Order dated September 1, 2014. This decision of the Grievance Redressal Committee of United Bank of India is under challenge in this writ petition.

(2.) Mr. S. Pal, learned Senior Advocate for the writ petitioners commences his submissions by contending that the Master Circular on Wilful Defaulters issued by the Reserve Bank of India is not a piece of subordinate legislation and, therefore, it is not binding on a bank carrying on banking business in India. He submits that, the Master Circular does not have statutory force.

(3.) Without prejudice to his first contention, he submits that, the Master Circular requires two committees to be formed by a bank. In the instant case, according to him, the compositions of the two committees were not in accordance with the Master Circular. He contends that, the procedure established by the Master Circular was not followed by United Bank of India. He refers to the first committee under the Master Circular as the Identification Committee. He submits that, the Identification Committee did not consider any document required of it to consider under the Master Circular when it recommended that the writ petitioners should be declared as a wilful defaulter. He submits that, Kingfisher Airlines Limited (KAL) was enjoying credit facilities from a consortium of bankers. United Bank of India is a member of such consortium. State Bank of India is the lead banker of the consortium. KAL faced financial difficulties at a given point of time. Such financial difficulties emanated out of factors external to the management of KAL. He contends that, in the fact of this case, KAL cannot be classified as a wilful defaulter within the meaning of the Master Circular of the Reserve Bank of India. He contends that the term "wilful default" has been defined in the Master Circular and that neither KAL nor any of the writ petitioners can be classified as a wilful defaulter within the meaning of the Master Circular. In support of such contention he refers to the letter dated January 31, 2012 issued by the lead banker, State Bank of India to the Reserve Bank of India. The lead banker had opined on January 31, 2012 that KAL was making every effort to achieve satisfactory performance of its operations. The lead banker had enumerated various reasons due to which the account of KAL had become irregular. All of such reasons were external to the management of the KAL. At least none of those reasons fall within the definition of wilful default under the Master Circular Mr. Pal contends that, the bank had to take such factor into consideration while evaluating the writ petitioners as wilful defaulters within the meaning of the Master Circular of the Reserve Bank of India.