Bombay High Court
SANKET SHRIKANTversusBANK OF BARODA
- Decided
- Disposal
- DISPOSED OFF
Holding
The orders declaring the petitioner a wilful defaulter are quashed as the bank failed to comply with the show‑cause notice and natural‑justice requirements of the RBI Master Circular.
Summary
The petitioner, a designated partner of Wannabe Foodies Hospitality LLP, challenged the Bank of Baroda's declaration of him as a wilful defaulter, seeking to quash the show‑cause notice dated 8 July 2021 and the subsequent orders of 16 September 2021 and 9 November 2021. He contended that he was never served with the show‑cause notice or the first order, a breach of the RBI’s Master Circular (dated 1 July 2014) which mandates service of notice and an opportunity to be heard before labeling a borrower a wilful defaulter. The bank argued that the notice was duly dispatched and that the petition was filed after an inordinate delay. The Court examined the provisions of the Master Circular, particularly paragraph 3(b), and held that the bank had not demonstrated actual service of the notice nor compliance with the procedural fairness requirements. Consequently, the Court found a violation of natural justice and set aside the impugned orders, directing the bank to follow due process if it wishes to initiate fresh proceedings. The petition was disposed with the relief granted.
Issues considered
- Whether the Bank of Baroda complied with the RBI Master Circular’s requirement of serving a show‑cause notice and providing a hearing before declaring the petitioner a wilful defaulter
- Whether the failure to demonstrate service of notice amounts to a violation of natural justice
- Whether the petition, filed after a delay, is barred by laches or latches
Subjects
- wilful defaulter
- natural justice
- show‑cause notice
- RBI Master Circular
- banking law
- writ petition
- quashing order
- procedural fairness
Judgment
Gokhale 1 of 7 2-wp-3756-25
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 3756 OF 2025
Sanket Inder Shrikant ..Petitioner
Versus
1. Bank of Baroda
2. Reserve Bank of India ..Respondents
__________
Mr. Ravi Shekhar Pandey a/w. Rushikesh Dusane i/b. Agama Law
Associates for Petitioner.
Ms. Rithika Yerra i/b. Chittranjan Shah, Kay Legal & Associates LLP
for Respondent No.1.
Mr. Benny Joseph a/w. Mr. Abu Usama Shaikh, Riyan Adi Jijina
and Siddhesh Kini i/b. BJ Law Offices LLP for Respondent No.2.
__________
CORAM : SARANG V. KOTWAL &
RANJITSINHA RAJA BHONSALE, JJ.
DATE : 10 SEPTEMBER 2026
JUDGMENT : (PER SARANG V. KOTWAL, J.)
1. Rule. Rule is made returnable forthwith with consent of
all the parties.
2. This petition is filed for directions to quash the show-
Digitally
cause notice dated 08.07.2021 and the orders dated 16.09.2021
signed by
VINOD
VINOD BHASKAR
BHASKAR GOKHALE
GOKHALE Date:
2026.09.11
and 09.11.2021. The result of the orders is that the Petitioner is
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+0530
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declared as a Wilful Defaulter by the Respondent No.1-Bank of
Baroda.
3. Heard Mr. Ravi Shekhar Pandey, learned counsel for the
Petitioner, Ms. Rithika Yerra, learned counsel for the Respondent
No.1 and Mr. Benny Joseph, learned counsel for the Respondent
No.2.
4. The case of the Petitioner is as follows:
The Petitioner is a designated partner in Limited
Liability Partnership (LLP) for Wannabe Foodies Hospitality LLP
(hereinafter referred to as ‘WFH’). The said entity had applied to
the Respondent No.1 for a Cash Credit Facility of Rs.30 lakhs
under the Credit Guarantee Fund Scheme for Micro and Small
enterprises. The petition mentions as to why WFH underwent
financial distress. There are various reasons mentioned in the
petition. One of the reasons was the acts of one Ram Karuturi. At
this stage, we need not go to the details as to why the said entity
underwent financial distress. We are considering the procedure
adopted by the Respondent No.1-Bank in declaring the Petitioner
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as a Wilful Defaulter.
5. Learned counsel for the Petitioner submitted and it is the
case of the Petitioner that the Petitioner was never served with a
show-cause notice which was the fundamental requirement in
initiating the process of declaring any person as defaulter under
the Circular dated 01.07.2014 (hereinafter referred to as ‘Master
Circular) issued by the Respondent No.2-RBI. He submitted that
the Petitioner was never served with not only the show-cause
notice, but even the first order dated 16.09.2021 whereby he was
declared as a Wilful Defaulter. He was only served with the order
of the Review Committee dated 09.11.2021 which is annexed at
Annexure-A to the present petition. Therefore, only and main
contention raised by the Petitioner is violation of principles of
natural justice and violation of the directions issued by the
Respondent No.2-RBI in the said Master Circular. The Master
Circular bears No. RBI/2014-15/73 DBR.No.CID.BC.57/20.16.003
/2014-15.
6. In response to the contentions raised by the learned
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counsel for the Petitioner, the learned counsel for the Respondent
No.1-Bank relied on the Affidavit in Reply filed in this case. It is
the contention of the Respondent No.1 that the petition is filed
belatedly and hence suffers from the vice of delay and latches. The
impugned order is passed on 09.11.2021 and the petition is filed
in the year 2025. As far as specific ground raised by the Petitioner
that the show-cause notice and the order were not served is
concerned, the reply refers to that ground to some extent in
paragraph-18 of the reply which reads thus:
“I say that the allegation that the Show Cause Notice
dated 08.07.2021 and the Order of the Wilful Defaulter
Committee dated 16.09.2021 were not served upon the
Petitioner is false, misleading and denied. The said
Show Cause Notice was duly issued and dispatched to
the Petitioner at his address as per the Bank’s KYC
records and was also communicated through official
banking channels. The Petitioner cannot take
advantage of alleged non-receipt when notices were
dispatched in the ordinary course of business and no
prejudice has been demonstrated. In any event, the
Petitioner had sufficient knowledge of the proceedings
and participated in subsequent correspondence,
thereby curing any alleged defect of service.”
7. We have considered these submissions. The relevant
guidelines in the Master Circular referred to herein above are
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mentioned in paragraph-3 of the said Circular, and in particular,
paragraph-3(b) is important; which reads thus:
“3. Mechanism for identification of Wilful Defaulters
(a) xxxx
(b) If the Committee concludes that an event of
wilful default has occurred, it shall issue a Show Cause
Notice to the concerned borrower and the
promoter/whole-time director and call for their
submissions and after considering their submissions
issue an order recording the fact of wilful default and
the reasons for the same. An opportunity should be
given to the borrower and the promoter/whole-time
director for a personal hearing if the Committee feel
such an opportunity is necessary.”
8. Thus, issuance of a show-cause notice and affording
reasonable opportunity to the proposed defaulter is a very
essential ingredient of the guidelines issued by the Respondent
No.2-RBI. It is not a mere empty formality, but it has to be
followed in spirit.
9. In the present matter, the reply of the Respondent No.1-
bank does not specifically establish that the show-cause notice was
served on the Petitioner and does not mention what steps were
taken in that behalf. There is no reference to whether any paper
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publication was actually made and if it was made, under what
circumstances it was made. The reply does not establish that a
show-cause notice was actually served on the Petitioner. Thus, in
the present case, there is a clear violation of the principles of
natural justice. On this ground alone, the impugned orders are
required to be set aside.
10. Hence, the following order:
ORDER
i) Rule is made absolute in terms of prayer clause
(a); which reads thus:
“a) Issue a writ of certiorari or any other
appropriate writ, order or direction in nature of
certiorari calling for the records and proceedings
pertaining to the meetings and hearing carried out
by the Wilful Defaulter Committee and the Wilful
Defaulter Review Committee of Respondent No.1
and issue writ or pass directions quashing the
Show Cause Notice dated 8th July 2021 and the
Orders dated 16th September 2021 and 9th
November 2021 along with all actions in
pursuance thereof.”
ii) The Respondent No.1-Bank of Baroda shall take
all consequential steps since the impugned orders
are set aside.
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iii) It is further clarified that, if necessary, the
Respondent No.1-Bank of Baroda can initiate
fresh proceedings in the present subject matter
after following due process of law.
iv) The Petition is disposed of.
(RANJITSINHA RAJA BHONSALE, J.) (SARANG V. KOTWAL, J.)
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