K.T. SAIDALAVI Vs. RESERVE BANK OF INDIA

JUDGEMENT

(1.) The Petitioner claims that he is the Chairman of Tip Top Furniture Group having six business units engaged in the business of manufacturing, importing, exporting, and trading of furniture. As per the averments in the Writ Petition, Tip Top Furniture Group availed loans from the Respondent No.2/Bank for a total amount of Rs.47.79 Crores against common securities. Tip Top Furniture Group has repaid more than Rs.11.00 Crores towards the loans. When the repayments were defaulted, the Respondent No.2 filed O.A. No.148/2022 before the Debts Recovery Tribunal (DRT), Ernakulam, for recovery of an amount of Rs.53,19,81,574.00 and interest thereon. The Respondent No.2 initiated SARFAESI proceedings and Securitisation Applications are pending before the DRT, challenging the same. In SARFAESI proceedings and in liquidation proceedings initiated against one of the business units, viz., Tip Top Furniture Private Limited, the Respondent No.2 has recovered Rs.4,25,39,925.00 and Rs.12,77,11,158.00respectively. The Petitioner claims that the Respondent No.2 has received a total amount of Rs.28,28,06,798.00 towards the loans availed by the Tip Top Furniture Group. Respondent No.2 issued Ext.P5 Show Cause Notice dtd. 30/5/2024 to Tip Top Furniture Industries, represented by the Petitioner and its other partners, asking them to show cause why they should not be classified as fraud to take action in terms of the Reserve Bank of India Master Directions on Frauds - Classification and Reporting by Commercial Banks and Select FI dtd. 1/7/2016. The Respondent No.3/Fraud Examination Committee of the Respondent No.2 passed Ext.P6 Order dtd. 4/1/2025, classifying Tip Top Furniture Industries and its partners, including the Petitioner, as fraud in terms of Ext.P7 Master Directions on Fraud Risk Management in Commercial Banks (including Regional Rural Banks) and All India Financial Institutions, 2024. Tip Top Furniture Industries and its partners, including the Petitioner, filed W.P.(C) No.3676/2025 challenging Ext.P6 Order and this Court disposed of the said Writ Petition as per Ext. P8 judgment dtd. 18/3/2025 setting aside Ext.P6 Order, directing the Respondent No.2 to furnish a copy of the Audit Report of the Competent Authority and finalise the proceedings as per the procedure laid down in Chapter II of Ext.P7 RBI Master Directions and in State Bank of India and Others v. Rajesh Agarwal and Others [(2023) 6 SCC 1]. Thereafter, the Respondent No.2 issued Ext.P9 Show Cause Notice dtd. 10/9/2025 and the Petitioner submitted Ext.P10 Reply dtd. 30/9/2025 for the Tip Top Furniture Group. Respondent No.2 issued Ext.P11 Notice dtd. 12/11/2025 requesting the Petitioner to confirm whether he wishes to avail the facility of a personal hearing and further stating that he has to appear for the hearing in person and he will not be permitted to be assisted by any third party, viz., Lawyers/ Chartered Accountants/ Consultants, Etc. The Petitioner submitted Ext.P12 dtd. 14/11/2025 to the Respondent Nos.2 and 3 requesting to permit him to attend the hearing along with his authorised representatives. Respondent No.2 issued Ext.P13 dtd. 15/11/2025 directing the Petitioner to appear for a personal hearing without any authorised expert representative. The Petitioner submitted Ext.P14 dtd. 26/11/2025 to the Respondent Nos.2 and 3 requesting to furnish the Board Approved Policy on Fraud Risk Management contemplated under Chapter II of Ext.P7 RBI Master Directions. The Respondent No.2 issued Ext.P15 dtd. 28/11/2025 to the Petitioner stating that the Board Approved Policy on Fraud Risk Management contemplated under Chapter II of Ext.P7 RBI Master Directions/Policy is an internal document of the Bank and is protected under banking confidentiality and risk norms and that it is framed in line with extant RBI's Master Directions and disclosure of such documents to the Petitioner is not required and it is in no way connected with the Show Cause Notice issued to the Petitioner. Thereafter, the Petitioner has filed this Writ Petition challenging Exts.P13 and P15, seeking direction to the Respondent Nos.2 and 3 to comply with Ext.P7 Mater Directions and to act in accordance with the same, to provide a copy of the Board Approved Policy on Fraud Risk Management of the Respondent No.2 and to permit the Petitioner to be represented by a Competent Representative along with the Petitioner at the time of hearing.

(2.) The Respondent Nos. 2 and 3 have filed Counter Affidavit dtd. 6/1/2026 contending, inter alia, that the Writ Petition under Article 226 of the Constitution of India is not maintainable against the Respondent No.2 as the Respondent No.2 is not a 'State' within the meaning of Article 12 of the Constitution of India; that the question whether a person who is to be declared as wilful defaulter under RBI Directions, is entitled to be represented by a lawyer is covered by the decision of the Hon'ble Supreme Court in State Bank of India v. Jah Developers Private Limited and Others [(2019) 6 SCC 787]; that the said principle is squarely applicable to the case of the Petitioner; that the principles of natural justice is satisfied when the Petitioner was issued with Ext.P9 Show Cause Notice and the Petitioner was afforded an opportunity to submit Ext.P10 Reply and there is no necessity for further hearing; that the Board Approved Policy is an internal document of the Respondent No.2 and is protected under banking confidentiality and risk norms and it is not in any way connected with the issuance of Ext.9 Show Cause Notice and hence there is no illegality in issuing Ext.P15 denying the same; that Ext.P5 Show Cause Notice was issued by the Respondent No.2 on the basis of the finding in a Forensic Audit Report with respect to the accounts of the Tip Top Group by a Chartered Accountant; that the explanations tendered by the Petitioner in Ext.P10 itself is sufficient for the Respondent Nos.2 and 3 to proceed with the matter; that the Respondent Nos.2 and 3 would be in a position to adjudicate and enter into findings on the explanation offered without there being any necessity of oral hearing; that even then the Respondent No.2 issued Ext.P11 to the Petitioner giving an opportunity of personal hearing specifically stating that the Petitioner to attend the hearing-in-person and not to be assisted by the third party, namely, Lawyers/ Chartered Accountants/ Consultants, etc; that the Petitioner was directed to confirm his attendance for personal hearing on or before 15/11/2025 but he did not provide any intimation; that only on 26/11/2025 the Petitioner issued Ext.P14 with the request for providing the Board Approved Policy on Fraud Risk Management as contemplated under Chapter II of Ext.P7 RBI Master Directions; that it shows the deliberate attempt on the part of the Petitioner to avoid personal hearing; that the decision of the Hon'ble Supreme Court in Rajesh Agarwal (supra) and Ext.P7 does not envisage a right of personal hearing to the Petitioner and hence the Writ Petition is liable to be dismissed.

(3.) I heard Smt. K.A. Sanjeetha, the learned Counsel for the Petitioner, and Sri. C. Ajith Kumar, learned Counsel for Respondent Nos.2 and 3.