Shrivardhan Goenka Vs State Bank of India and Others (Calcutta High Court)
The Calcutta High Court examined the legality of declaring a Non-Executive Director as a wilful defaulter under the Reserve Bank of India Master Circular on Wilful Defaulters dated July 1, 2015. The petitioner, who was a Non-Whole Time Non-Executive Director of a borrower company, challenged the decision of the Wilful Defaulter Identification Committee and its affirmation by the Review Committee, contending that Clause 3(d) of the Master Circular was not applied.
The Court noted that Clause 3(d) places Non-Whole Time Directors on a distinct footing from promoters and Whole Time Directors and permits their classification as wilful defaulters only in rare cases, where it is conclusively established that such directors had knowledge of wilful default through board proceedings and failed to object, or where default occurred with their consent or connivance. The petitioner had consistently asserted that he was neither a promoter nor a Whole Time Director, relying on the company’s prospectus, annual reports, and stock exchange disclosures, all of which showed him only as a Non-Executive Director. The Court found no document on record substantiating the bank’s claim that the petitioner was a promoter.
The bank argued that the petitioner had knowledge of financial transactions, attended board meetings, and was associated with the company during periods relevant to default. However, the Court observed that attendance at board meetings or being named as a director in financial statements did not automatically satisfy the stringent requirements of Clause 3(d). It further found no evidence of board minutes, consent, connivance, or exceptional circumstances establishing the petitioner’s involvement in wilful default.
