The Delhi High Court ruled that classifying Ratul Puri, ex-director of Moser Baer, and his mother Nita Puri as “wilful defaulters” under the RBI Master Circular was legally unsustainable.
A division bench dismissed appeals by Bank of Baroda and Punjab National Bank, noting no verified, objective proof of intentional diversion or siphoning of borrowed funds.
The court stressed that a wilful defaulter declaration amounts to “civil death” and must be based on objective facts and the borrower’s track record.
The Delhi High Court has held that the classification of Ratul Puri, former director of Moser Baer India Limited, and his mother Nita Puri as "wilful defaulters" under the Reserve Bank of India (RBI) Master Circular is "legally unsustainable".
A division bench of Justices C Hari Shankar and Ajay Digpaul passed the order while dismissing appeals filed by the Bank of Baroda (BoB) and the Punjab National Bank (PNB).
The bench held that the "wilful defaulter" declarations were legally unsustainable since the banks had failed to establish, "through verified and objective material, that the transactions in question involved borrowed funds that had been intentionally diverted or siphoned off".
"The authorities, at all stages, have to be alive to the fact that a declaration of wilful default, within the meaning of the Master Circular, results in civil death," the bench said.
It added that such decisions must be based on the objective facts and circumstances of the case and the borrower's overall track record.
The division bench was hearing an appeal against an order passed by a single-judge bench.
The single-judge bench had held that the essential ingredients of wilful default under the RBI's Master Circular were not met.
The banks had then filed the appeals.
