STATE BANK OF INDIA versus M/S. JAH DEVELOPERS PVT. LTD. & ORS.

Citation: [2019] 7 S.C.R. 701 · Decided: 08-05-2019 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Appeal(s) allowed

Cited by 3 judgment(s) · cites 6 · see the full citation network in Lexace

Judgment (excerpt)

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701
STATE BANK OF INDIA
v.
M/S. JAH DEVELOPERS PVT. LTD. & ORS.
(Civil Appeal No. 4776 of 2019)
MAY 08, 2019
[R. F. NARIMAN AND VINEET SARAN, JJ.]
Advocates Act, 1961 – s.30 – Master Circular dtd. 01.07.13
issued by RBI inter alia setting out mechanism for identification of
wilful defaulters, entrusted cases of wilful default to a Committee
of higher functionaries, which would then take a preliminary
decision – Thereafter, the borrower should be provided 15 days’
time for making representation to the Grievance Redressal Committee
headed by the Chairman and the Managing Director and consisting
of two other senior officers– Such Committee must give hearing to
the borrower if he represents that he has been wrongly classified as
a wilful defaulter, and it is only after such hearing that a final
declaration as wilful defaulter should be made – Revised Circular
dtd. 01.07.15 issued by RBI, replaced the aforesaid scheme by making
an Executive Director and two other senior officers examine
evidence of wilful default on the part of the borrower – If this First
Committee finds that an event of wilful default has occurred, it should
first issue show cause notice to the borrower and call for his
submissions, and after considering his submissions, issue an order
recording the fact of wilful default and reasons for the same –
Personal hearing can be given only if the Committee feels that such
hearing is necessary – Order of the Committee to be reviewed by
another Committee (Review Committee) – Issue as to whether a
lawyer ought to be allowed to represent the borrower before the
First Committee and/or Review Committee under the Revised Circular
– High Court held that the two in-house committees can be
considered to be tribunals, and therefore, a lawyer has the right to
represent his client before such in-house committees – On appeal,
held: In-house committees appointed under the Revised Circular
are not vested with any judicial power at all, their powers being
administrative powers, to gather facts and then arrive at a result –
No lawyer has any right u/s.30 to appear before the in-house
   [2019] 7 S.C.R. 701
701
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SUPREME COURT REPORTS
[2019] 7 S.C.R.
committees – Said committees are also not persons legally authorised
to take evidence by statute/subordinate legislation – On this score
also, no lawyer would have any right u/s.30 to appear before the
same – However, Art.19(1)(g) is attracted in the facts of the present
case as the moment a person is declared wilful defaulter, the impact
on its fundamental right to carry on business is direct and immediate
– Given the drastic consequences, the Revised Circular, being in
public interest, construed reasonably – Committee comprising of
the Executive Director and two other senior officials, being the First
Committee must give its order to the borrower as soon as it is made
– Borrower can represent against such order within 15 days to the
Review Committee – Review Committee must then pass a reasoned
order which must then be served on the borrower – All these steps
incorporated into the Revised Circular – Impugned judgment set
aside – Constitution of India – Art.19(1)(g) – Principles of natural
justice – Committees – Insolvency and Bankruptcy Code, 2016 –
s.29A.
Committees – When not tribunal – Held: Before a body can
be said to be a “tribunal”, it must be invested with the judicial
power of the State to decide a lis arising before it, must be legally
authorised to take evidence by statute/subordinate legislation or
otherwise.
Principles of natural justice – Revised Circular issued by RBI
replacing the mechanism for identification of wilful defaulters as
provided in the earlier Circular – In-house committees referred to
in the Circular – Right of oral hearing before such committees, if
any – Held: Given the scheme of the Revised Circular, it is difficult
to state that oral hearing is mandatory – Natural justice is a flexible
tool used in order that a person or authority arrives at a just result
– Such result can be arrived at in many cases without oral hearing
but on written representations given by parties, after considering
which, a decision is then arrived at.
Allowing the appeals, the Court
HELD:1.1  The earlier Master Circular dated 01.07.2013
granted a hearing before the Grievance Redressal Committee
headed by the Chairman/Managing Director, and also provided
that the borrower should be provided 15 days’ time for making a
representation against the

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