REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4776 OF 2019 (Arising out of Special Leave Petition (Civil) No. 8591 of 2016)

STATE BANK OF INDIA    … APPELLANT

VERSUS

M/S. JAH DEVELOPERS PVT. LTD. & ORS. … RESPONDENTS

WITH CIVIL APPEAL NO. 4777 OF 2019

(Arising out of Special Leave Petition (Civil) No.10008 of 2017)

WITH CIVIL APPEAL NO. 4778 OF 2019

(Arising out of Special Leave Petition (Civil) No.26329 of 2017)

JUDGMENT

R.F. NARIMAN, J.  

1. Leave granted.

2. The question that arises in the present appeals is whether, when

a person is declared to be a wilful defaulter under the Circulars of the

Reserve  Bank  of  India  [“RBI”],  such  person  is  entitled  to  be

represented by a lawyer of its choice before such declaration is made.  

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3. The RBI Circular  dated 01.07.2013 is  described as a “Master

Circular on Wilful Defaulters” [“Master Circular”] and is addressed to

all  scheduled  commercial  banks  (excluding  Regional  Rural  Banks

(RRBs)  and  Local  Area  Banks  (LABs)),  and  to  All  India  Notified

Financial Institutions. The purpose of the said Master Circular is stated

as follows:

“Purpose: To  put  in  place  a  system  to  disseminate  credit information pertaining to wilful  defaulters for cautioning banks  and  financial  institutions  so  as  to  ensure  that further bank finance is not made available to them.”

Under this Master Circular, “wilful default” has been defined as follows:

“2.1. Definition of wilful default The  term  “wilful  default”  has  been  redefined  in supersession of the earlier definition as under: A “wilful default” would be deemed to have occurred if any of the following events is noted:-

(a) The  unit  has  defaulted  in  meeting  its payment/repayment  obligations  to  the lender  even  when  it  has  the  capacity  to honour the said obligations.

(b) The  unit  has  defaulted  in  meeting  its payment/repayment  obligations  to  the lender and has not utilised the finance from the  lender  for  the  specific  purposes  for which  finance  was  availed  of  but  has diverted the funds for other purposes.  

(c) The  unit  has  defaulted  in  meeting  its payment/repayment  obligations  to  the lender and has siphoned off the funds so that the funds have not been utilised for the specific  purpose  for  which  finance  was

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availed of, nor are the funds available with the unit in the form of other assets.

(d) The  unit  has  defaulted  in  meeting  its payment/repayment  obligations  to  the lender  and  has  also  disposed  off  or removed  the  movable  fixed  assets  or immovable property given by him or it  for the purpose of securing a term loan without the knowledge of the bank/lender.”  

The Grievance Redressal Mechanism is set out in paragraph 3 of the

Master Circular as follows:

“3. Grievance Redressal Mechanism Banks/FIs  should  take  the  following  measures  in identifying and reporting instances of wilful default:

(i) With a view to imparting more objectivity in identifying cases of wilful default, decisions to classify the borrower as wilful defaulter should  be  entrusted  to  a  Committee  of higher  functionaries  headed  by  the Executive  Director  and  consisting  of  two GMs/DGMs as decided by the Board of the concerned bank/FI.

(ii) The  decision  taken  on  classification  of wilful  defaulters  should  be  well documented  and  supported  by  requisite evidence.  The decision should clearly spell out the reasons for which the borrower has been declared as wilful  defaulter vis-à-vis RBI guidelines.

(iii) The borrower should thereafter be suitably advised about the proposal to classify him as wilful  defaulter  along with the reasons therefor.  The concerned borrower should be provided reasonable time (say 15 days) for  making  representation  against  such decision, if  he so desires, to a Grievance Redressal  Committee  headed  by  the

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Chairman  and  Managing  Director  and consisting of two other senior officials.

(iv) Further,  the  above  Grievance  Redressal Committee should  also give a hearing to the borrower if  he represents that he has been wrongly classified as wilful defaulter.

(v) A  final  declaration  as  ‘wilful  defaulter’ should be made after a view is taken by the Committee on the representation and the borrower should be suitably advised.”

4. On  01.07.2015,  the  RBI  issued  another  Master  Circular

consolidating instructions on how all scheduled commercial banks and

notified financial institutions are to deal with wilful defaulters [“Revised

Circular”]. The definition of “wilful default” is substantially the same as

in  the  earlier  Master  Circular.  However,  the  mechanism  for

identification of wilful defaulters has been substituted as follows:

“3. Mechanism for identification of Wilful Defaulters The  mechanism  referred  to  in  paragraph  2.5  above should generally include the following:

(a) The evidence of wilful default on the part of the  borrowing  company  and  its promoter/whole-time  director  at  the relevant  time  should  be  examined  by  a Committee  headed  by  an  Executive Director or equivalent and consisting of two other  senior  officers  of  the  rank  of GM/DGM.

(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

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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  feels such an opportunity is necessary.  

(c) The  order  of  the  Committee  should  be reviewed by another Committee headed by the  Chairman/Chairman  &  Managing Director or the Managing Director & Chief Executive Officer/CEOs and consisting, in addition, to two independent directors/non- executive  directors  of  the  bank  and  the Order  shall  become  final  only  after  it  is confirmed by the said Review Committee. However,  if  the  identification  Committee does  not  pass  an  order  declaring  a borrower  as  a  wilful   defaulter,  then  the Review Committee need not be set up to review such decisions. xxx xxx xxx”

5. Considering that nobody appeared on behalf of the respondents

in  the  Civil  Appeal  arising  out  of  SLP (C)  No.  8591  of  2016,  we

appointed Shri Parag Tripathi, learned Senior Advocate, to assist us as

Amicus Curiae. Shri Tripathi has forcefully argued that Section 30 of

the  Advocates  Act,  1961 [“Advocates  Act”]  makes  it  clear  that  an

advocate has the right to practice before any tribunal or person legally

authorised  to  take  evidence.  Secondly,  he  spoke  about  the

consequences, both civil and criminal, of being classified as a wilful

defaulter,  and  stated  that  as  serious  consequences  ensue,  the

fundamental  right  of  the  borrower  under  Article  19(1)(g)  of  the

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Constitution of India would be impacted, as a result of which, it would

be  necessary  to  read  into  the  aforesaid  guidelines  a  right  to  be

represented by a lawyer. The only possible objection that banks can

have  is  that  lawyers  might  unnecessarily  delay  the  process  of

declaration of a borrower as a wilful defaulter by seeking adjournments

and otherwise protracting arguments. He submitted that this can be

curtailed and it  can be made clear  that  no adjournment  under  any

circumstances shall be given and a maximum period of half an hour for

argument may be given. According to him, the borrower may not be

competent to represent himself and issues of discrimination may also

arise.  He  therefore  supported  the  impugned judgment  of  the  Delhi

High Court in State Bank of India v. M/s. Jah Developers Pvt. Ltd.

and Ors., LPA No. 113 of 2015. He pointed out that the Bombay High

Court, in Kingfisher Airlines Ltd. v. Union of India and Ors., WP (L)

No. 1684 of 2015, and the Calcutta High Court, in Kingfisher Airlines

Ltd. v. Union of India and Ors., AST No. 320 of 2014, have taken a

different view which was not in consonance with the Delhi High Court’s

view and the Delhi High Court’s view ought to prevail. Shri Tripathi’s

submission was supported by Shri Rakesh Kumar, learned Advocate

appearing on behalf of the respondent in Civil  Appeal arising out of

SLP (C) No. 10008 of 2017.

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6. On  the  other  hand,  Shri  Neeraj  Kishan  Kaul  and  Shri  B.B.

Sawhney,  learned  Senior  Advocates  appearing  on  behalf  of  the

appellants in Civil Appeals arising out of SLP (C.) No. 8591 of 2016

and  SLP  (C.)  No.  10008  of  2017  respectively,  and  Shri  Preetesh

Kapur, learned Senior Advocate appearing on behalf of the intervenor

in  Civil  Appeal  arising out  of  SLP (C.)  No.  26329 of  2017,  cited a

number of judgments to show that the right to legal representation is

no part of the right of natural justice. They also assailed the judgment

of the Delhi High Court, stating that by no stretch of imagination could

the in-house committees referred to in the RBI Circulars be said to be

“tribunals” inasmuch as there is no investment of any judicial power by

the  State  in  these  in-house  committees.  They  buttressed  this

submission also by reference to several judgments. According to them,

therefore, the Calcutta and Bombay High Courts’ view is preferable to

the Delhi High Court’s view. It will be noted that the Master Circular

dated 01.07.2013 first entrusted cases of wilful default to a Committee

of higher functionaries, which Committee would then take a preliminary

decision which should be well documented and supported by evidence

[“First  Committee”].  Thereafter,  the  concerned borrower  should  be

provided 15 days’ time for making a representation to the Grievance

Redressal  Committee  headed  by  the  Chairman  and  the  Managing

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Director  and  consisting  of  two  other  senior  officers  [“Review

Committee”].  Further,  such  Committee  must  give  a  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. On the other hand, the Revised

Circular  dated  01.07.2015  circumscribes  the  right  of  borrowers,  as

paragraph 3 of the Revised Circular replaces 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 Committee

finds that an event of wilful default has occurred, it should first issue a

show  cause  notice  to  the  concerned  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;  a

personal hearing can be given only if the Committee feels that such

hearing is necessary. Thereafter, the order of the Committee is to be

reviewed by another Committee headed by the Chairman/Chairman

and  Managing  Director  or  CEO,  in  addition  to  two  independent

directors/non-executive  directors  of  the  bank  and  the  order  will

become final only after it is confirmed by the said Review Committee.  

7. It will  be noted that whereas the earlier Master Circular dated

01.07.2013  granted  a  hearing  before  the  Grievance  Redressal

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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 preliminary decision of the First

Committee, this situation does not now obtain. Under paragraph 3 of

the Revised Circular dated 01.07.2015, it is only at the first stage that

the First Committee is to issue a show cause notice and to consider

the  submissions  of  the  borrower,  a  discretion  being  left  with  the

aforesaid Committee to give or not to give a personal hearing. It may

be noticed that the Review Committee consisting of the higher officials

and independent  directors is  completely  in-house.  Neither  does the

order of the First Committee have to be given to the borrower, nor is

any representation required against the aforesaid order, nor is there

any  personal  hearing  before  the  Review  Committee,  which  goes

through the  First  Committee’s  order  by itself  and  then comes to  a

conclusion without involving the borrower at all.  

8. At  this  stage,  it  is  necessary  to  mention  that  serious

consequences follow after  a person has been classified as a wilful

defaulter. These consequences are as follows:

(a) No additional facilities to be granted by any

bank/financial institution [paragraph 2.5(a)].

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(b) Entrepreneurs/Promoters would be barred

from institutional finance for a period of 5

years [paragraph 2.5(a)].

(c) Any  legal  proceedings  can  be  initiated,

including  criminal  complaints  [paragraph

2.5(b)].

(d) Banks  and  financial  institutions  to  adopt

proactive  approach  in  changing  the

management  of  the  wilful  defaulter

[paragraph 2.5(c)].

(e) Promoter/Director  of  wilful  defaulter  shall

not  be  inducted  by  another  borrowing

company [paragraph 2.5(d)].

(f) As per section 29A of the Insolvency and

Bankruptcy Code, 2016, a wilful  defaulter

cannot be a resolution applicant.

9. It is in this background that we have to consider the question 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 dated 01.07.2015.   

10. Since the judgment of the Delhi High Court has held that the two

in-house  committees  can  be  considered  to  be  tribunals,  and  that

therefore, a lawyer has the right to represent his client before such in-

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house committees, it is first necessary to determine whether these in-

house  committees  can  be  said  to  be  tribunals  for  the  purpose  of

Section  30  of  the  Advocates  Act.  Section  30  of  the  Advocates  Act

reads as follows:  

“30.  Right  of  advocates to practise.—Subject  to  the provisions  of  this  Act,  every  advocate  whose name is entered in the State roll  shall  be entitled as of right  to practise  throughout  the  territories  to  which  this  Act extends,—

(i) in all courts including the Supreme Court; (ii) before  any  tribunal  or  person  legally

authorised to take evidence; and (iii) before any other authority or person before

whom such advocate  is  by  or  under  any law for the time being in force entitled to practise.”

11. The impugned judgment  has held  that  the expression “legally

authorised to take evidence” goes with the word “person” and not with

the word “tribunal”. While this may be correct, it is clear that 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 which arises before it. This would

necessarily mean that all “tribunals” must be legally authorised to take

evidence by statute or subordinate legislation or otherwise, the judicial

power of the State vesting in such tribunal.  This Court,  in  Jaswant

Sugar Mills Ltd., Meerut v. Lakshmi Chand and Ors., [1963] Supp

(1) SCR 242, held that a Conciliation Officer under clause 29 of an

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Order promulgated under the U.P. Industrial Disputes Act, 1947, has to

act judicially. However, he cannot be regarded as a “tribunal” within the

meaning of  Article  136 of  the Constitution of  India as such tribunal

must be a body invested with the judicial power of the State, which a

Conciliation Officer was not so invested with. Similarly, in Engineering

Mazdoor Sabha and Anr. v. Hind Cycles Ltd., [1963] Supp (1) SCR

625, this Court held that an arbitrator appointed under Section 10-A of

the Industrial  Disputes Act,  1947 could not be said to be a tribunal

because  the  State  has  not  invested  him  with  judicial  power.  His

position may be stated to be higher than that of a private arbitrator, but

lower than that of a tribunal.  

12. Similarly,  in  Associated  Cement  Companies  Ltd.  v.  P.N.

Sharma and Anr., [1965] 2 SCR 366, this Court held that the State of

Punjab is a tribunal when it exercises its authority under Rule 6(6) of

the Punjab Welfare  Officers  Recruitment  and Conditions of  Service

Rules, 1952. Hence, an order passed by the State of Punjab would be

appealable, as the State of Punjab is a “tribunal” within the meaning of

Article  136(1)  of  the  Constitution  of  India.  The  majority  judgment,

through Gajendragadkar, C.J., held that the basic test is whether the

adjudicating  power  which  a  particular  authority  is  empowered  to

exercise, has been conferred on it by a statute and can be described

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as a part  of  the State’s  inherent power exercised in discharging its

judicial function, can be said to be satisfied on the facts of the case. In

a separate concurring judgment, Bachawat, J., held:

“44. An authority other than a Court may be vested by statute  with  judicial  power  in  widely  different circumstances, which it would be impossible and indeed inadvisable to attempt to define exhaustively. The proper thing  is  to  examine  each  case  as  it  arises,  and  to ascertain whether the powers vested in the authority can be truly described as judicial functions or judicial powers of the State. For the purpose of this case, it is sufficient to say that any outside authority empowered by the State to  determine  conclusively  the  rights  of  two  or  more contending  parties  with  regard  to  any  matter  in controversy  between  them  satisfies  the  test  of  an authority vested with the judicial powers of the State and may be  regarded  as  a  tribunal  within  the  meaning  of Article 136. Such a power of adjudication implies that the authority  must  act  judicially  and  must  determine  the dispute  by  ascertainment  of  the  relevant  facts  on  the materials before it and by application of the relevant law to those facts. This test of a tribunal is not meant to be exhaustive, and it may be that other bodies not satisfying this test are also tribunals. In order to be a tribunal, it is essential that the power of adjudication must be derived from a statute or a statutory rule. An authority or body deriving its power of adjudication from an agreement of the  parties,  such  as  a  private  arbitrator  or  a  tribunal acting under Section 10-A of the Industrial Disputes Act, 1947, does not satisfy the test of a tribunal within Article 136.  It  matters  little  that  such  a  body  or  authority  is vested with the trappings of a Court. The Arbitration Act, 1940 vests an arbitrator with some of the trappings of a  Court, so also the Industrial Disputes Act, 1947 vests an authority acting under Section 10-A of the Act with many of such trappings, and yet, such bodies and authorities are not tribunals.”

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Applying the aforesaid tests to the facts of the present case, it cannot

be possibly said that either in-house committee appointed under the

Revised Circular dated 01.07.2015 is vested with the judicial power of

the State.  The impugned judgment’s  conclusion that  such Circulars

have statutory force, as a result of which the State’s judicial power has

been  vested  in  the  two  committees,  is  wholly  incorrect.  First  and

foremost,  the  State’s  judicial  power,  as  understood  by  several

judgments  of  this  Court,  is  the  power  to  decide  a  lis between  the

parties after gathering evidence and applying the law, as a result of

which, a binding decision is then reached. This is far from the present

case  as  the  in-house  committees  are  not  vested  with  any  judicial

power  at  all,  their  powers being administrative  powers given to  in-

house committees to gather facts and then arrive at a result. Secondly,

it cannot be said that the Circulars in any manner vests the State’s

judicial power in such in-house committees. On this ground, therefore,

the view of Delhi High Court is not correct, and no lawyer has any right

under Section 30 of the Advocates Act to appear before the in-house

committees so mentioned. Further, the said committees are also not

persons legally authorised to take evidence by statute or subordinate

legislation,  and on this  score also,  no lawyer  would have any right

under Section 30 of the Advocates Act to appear before the same.  

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13. The  next  question  that  arises  is  whether  an  oral  hearing  is

required  under  the  Revised  Circular  dated  01.07.2015.  We  have

already seen that the said Circular makes a departure from the earlier

Master Circular in that an oral hearing may only be given by the First

Committee  at  the first  stage  if  it  is  so found necessary.  Given the

scheme of the Revised Circular, it is difficult to state that oral hearing is

mandatory.  It  is  even  more  difficult  to  state  that  in  all  cases  oral

hearings must be given, or else the principles of natural justice are

breached. A number of judgments have held that natural justice is a

flexible tool that is used in order that a person or authority arrive 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. Indeed, in a recent

judgment in Gorkha Security Services v. Govt. (NCT of Delhi) and

Ors., (2014) 9 SCC 105, this Court has held, in a blacklisting case,

that where serious consequences ensue, once a show cause notice is

issued and opportunity to reply is afforded, natural justice is satisfied

and  it  is  not  necessary  to  give  oral  hearing  in  such  cases  [see

paragraph 20].

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14. When  it  comes  to  whether  the  borrower  can,  given  the

consequences of being declared a wilful defaulter, be said to have a

right to be represented by a lawyer, the judgments of this Court have

held  that  there is  no such unconditional  right,  and that  it  would  all

depend  on  the  facts  and  circumstances  of  each  case,  given  the

governing rules and the fact situation of each case. Thus, in Mohinder

Singh Gill  and Anr.  v.  Chief  Election Commissioner,  New Delhi

and Ors., (1978) 1 SCC 405, in the context of election law, this Court

held:

“63. In  Wiseman v.  Borneman [(1967)  3  All  ER  1945] there was a hint of the competitive claims of hurry and hearing. Lord Reid said: “Even where the decision has to be reached by a body acting judicially, there must be a balance between the need for expedition and the need to give full opportunity to the defendant to see material against  him”  (emphasis  added).  We  agree  that  the elaborate and sophisticated methodology of a formalised hearing may be injurious to promptitude so essential in an  election  under  way.  Even  so,  natural  justice  is pragmatically  flexible  and  is  amenable  to  capsulation under  the  compulsive  pressure  of  circumstances.  To burke it altogether may not be a stroke of fairness except in  very  exceptional  circumstances.  Even  in  Wiseman where all that was sought to be done was to see if there was  a  prima  facie  case  to  proceed  with  a  tax  case where, inevitably, a fuller hearing would be extended at a later stage of the proceedings, Lord Reid, Lord Morris of Borth-y-Gest and Lord Wilberforce suggested “that there might be exceptional cases where to decide upon it ex parte would be unfair,  and it  would be the duty of the tribunal to take appropriate steps to eliminate unfairness” (Lord Denning, M.R., in  Howard v.  Borneman  [(1974) 3

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WLR  660]  summarised  the  observations  of  the  Law Lords in this form). No doctrinaire approach is desirable but the Court must be anxious to salvage the cardinal rule to the extent permissible in a given case. After all, it is  not  obligatory  that  Counsel  should  be  allowed  to appear nor is it compulsory that oral evidence should be adduced. Indeed, it  is  not  even imperative that  written statements  should  be  called  for.  Disclosure  of  the prominent  circumstances and asking for  an immediate explanation orally or otherwise may, in many cases, be sufficient  compliance.  It  is  even  conceivable  that  an urgent meeting with the concerned parties summoned at an hour’s notice,  or  in a crisis,  even a telephone call, may suffice. ……”

(emphasis in original)

15. In  Kavita v. State of Maharashtra and Ors. (I), (1981) 3 SCC

558 [“Kavita”], this Court held, in the context of preventive detention,

that even when a detenu makes a request for legal assistance before

the  Advisory  Board,  the  Advisory  Board  is  vested with  a  discretion

whether to allow or disallow such legal assistance. This was despite

the  fact  that  adequate  legal  assistance  may  be  essential  for  the

protection  of  the  fundamental  right  to  life  and  personal  liberty

guaranteed by Article 21 of the Constitution. On facts, it was held that

since the detenu had not made any request to the Advisory Board for

any  such  permission,  the  Court  was  not  prepared  to  hold  that  the

detenu was denied the assistance of  counsel  so as to  lead to  the

conclusion that procedural fairness under Article 21 of the Constitution

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was denied to him. Likewise, in  Nand Lal Bajaj v. State of Punjab

and Anr., (1981) 4 SCC 327, this Court referred to Article 22(3)(b) of

the Constitution of India which states that the right to consult and be

defended by a legal practitioner of his choice is denied to a person

who is  arrested or  detained under  any law providing for  preventive

detention. This Court then went on to hold that normally, lawyers have

no place in proceedings before the Advisory Board, and then went on

to refer to  Kavita  (supra). It was finally held that since the detaining

authority  was  allowed  to  be  represented  by  counsel  before  the

Advisory Board, whereas the detenu was not, the order of detention

would be quashed as this would be discriminatory.

16. In J.K. Aggarwal v. Haryana Seeds Development Corporation

Ltd. and Ors., (1991) 2 SCC 283, this Court, after discussing the case

law, held in paragraph 4, that the right of representation by a lawyer

cannot be held to be a part of natural justice. No general principle valid

in all cases can be enunciated. In the last analysis, a decision has to

be reached on a case to case basis on situational particularities and

the special requirements of justice of the case [see paragraph 8].

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17. In  Crescent  Dyes  and  Chemicals  Ltd.  v.  Ram  Naresh

Tripathi, (1993) 2 SCC 115, this Court held that a workman under the

Industrial Disputes Act, 1947 has no right, under principles of natural

justice,  that  he  must  be  represented  by  counsel.  After  discussing

several judgments, this Court concluded:

“12. From the above decisions of the English Courts it seems clear to us that the right to be represented by a counsel or agent of one's own choice is not an absolute right  and  can be controlled,  restricted or  regulated by law, rules or regulations. However, if the charge is of a serious and complex nature, the delinquent's request to be  represented  through  a  counsel  or  agent  could  be conceded. 13. The law in India also does not concede an absolute right  of  representation as an aspect  of  the right  to  be heard, one of the elements of principle of natural justice. It has been ruled by this Court in (i)  Kalindi (N) v.  Tata Locomotive & Engineering Co. Ltd., Jamshedpur [(1960) 3 SCR 407 : AIR 1960 SC 914], (ii)  Brooke Bond India (P) Ltd. v. Subba Raman (S.) [(1961) 2 LLJ 417] and (iii) Dunlop Rubber Co. v. Workmen [(1965) 2 SCR 139 : AIR 1965 SC 1392] that there is no right to representation as such  unless  the  company  by  its  Standing  Orders recognises such a right.” xxx xxx xxx “17. It  is, therefore, clear from the above case-law that the right to be represented through counsel or agent can be restricted,  controlled  or  regulated by  statute,  rules, regulations or Standing Orders. A delinquent has no right to be represented through counsel or agent unless the law specifically confers such a right. The requirement of the rule of natural justice insofar as the delinquent's right of hearing is concerned, cannot and does not extend to a right to be represented through counsel or agent. In the instant case the delinquent's right of representation was regulated by the Standing Orders which permitted a clerk

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or a workman working with him in the same department to  represent  him  and  this  right  stood  expanded  on Sections 21 and 22(ii) permitting representation through an officer, staff-member or a member of the union, albeit on  being  authorised  by  the  State  Government.  The object and purpose of such provisions is to ensure that the domestic enquiry is completed with despatch and is not  prolonged  endlessly.  Secondly,  when  the  person defending  the  delinquent  is  from  the  department  or establishment  in  which  the  delinquent  is  working  he would  be  well  conversant  with  the  working  of  that department and the relevant rules and would, therefore, be able to render satisfactory service to the delinquent. Thirdly,  not  only  would  the  entire  proceedings  be completed quickly but also inexpensively. It is, therefore, not correct to contend that the Standing Order or Section 22(ii)  of  the Act  conflicts  with  the principles  of  natural justice.”

18. In  D.G., Railway Protection Force and Ors. v. K. Raghuram

Babu,  (2008)  4  SCC  406,  this  Court,  in  the  context  of  a

domestic/departmental enquiry held:

“9. It  is  well  settled  that  ordinarily  in  a domestic/departmental  enquiry  the  person  accused  of misconduct has to conduct his own case vide N. Kalindi v.  Tata Locomotive and Engg.  Co.  Ltd. [AIR 1960 SC 914]. Such an inquiry is not a suit or criminal trial where a party has a right to be represented by a lawyer. It is only if there is some rule which permits the accused to be represented by someone else, that he can claim to be so represented in an inquiry vide Brooke Bond India (P) Ltd. v. Subba Raman [(1961) 2 LLJ 417 (SC)]. 10. Similarly, in Cipla Ltd. v. Ripu Daman Bhanot [(1999) 4 SCC 188 : 1999 SCC (L&S) 847] it was held by this Court  that  representation  could  not  be  claimed  as  of right. This decision followed the earlier decision  Bharat Petroleum Corpn. Ltd. v.  Maharashtra General Kamgar

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Union [(1999)  1  SCC 626 :  1999 SCC (L&S)  361]  in which  the  whole  case  law has  been reviewed by  this Court. 11. Following the above decision it  has to be held that there  is  no  vested  or  absolute  right  in  any  charge- sheeted  employee  to  representation  either  through  a counsel or through any other person unless the statute or  rules/standing  orders  provide  for  such  a  right. Moreover, the right to representation through someone, even  if  granted  by  the  rules,  can  be  granted  as  a restricted  or  controlled  right.  Refusal  to  grant representation  through  an  agent  does  not  violate  the principles of natural justice.”

Ultimately, the Court upheld the validity of Rule 153.8 of the Railway

Protection Force Rules, 1987, which permitted a friend to accompany

a delinquent, who will not, however, be allowed to address the inquiry

officer or be allowed to cross-examine witnesses.  

19. It has also been argued before us that the present case, being a

case where “wilful default” consists of facts which are known to the

borrower, and as “wilful default” would only be the borrower’s version

of facts, no lawyer is needed as no complicated questions of law need

to be presented before the in-house committees.  Thus,  in  Krishna

Chandra Tandon v.  Union of India,  (1974) 4 SCC 374, this Court

held:  

“17. It was next argued that the appellant had asked for the assistance of an advocate but the same was refused.

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It was submitted that having regard to the intricacies of the case and particularly the ill-health of the appellant, he should have been given the assistance of an advocate, and since that was not given there was no reasonable opportunity to defend. The High Court has rejected this submission and we think for good reasons. The appellant was not entitled under the Rules to the assistance of an advocate during the course of the enquiry. The learned Judges  were  right  in  pointing  out  that  all  that  the appellant had to do in the course of the enquiry was to defend the correctness of his assessment orders. Clear indications had been given in the charges with regard to the  unusual  conduct  he  displayed  in  disposing  of  the assessment  cases  and  the  various flaws and defaults which  were  apparent  on  the  face  of  the  assessment records themselves. The appellant was the best person to  give proper  explanations.  The  circumstances in  the evidence against him were clearly put to him and he had to give his explanation. An advocate could have hardly helped him in this. It was not a case where oral evidence was  recorded  with  reference  to  accounts  and  the petitioner  required the services of  a trained lawyer  for cross-examining  the  witnesses.  There  was  no  legal complexity in the case. We do not, therefore, accede to the contention that the absence of a lawyer deprived the appellant of a reasonable opportunity to defend himself.”

20. Also, in National Seeds Corporation Ltd. v. K.V. Rama Reddy,

(2006) 11 SCC 645, this Court laid down:

“7. The law in this country does not concede an absolute right  of  representation  to  an  employee  in  domestic enquiries as part of his right to be heard and that there is no right to representation by somebody else unless the rules or regulation and standing orders, if any, regulating the  conduct  of  disciplinary  proceedings  specifically recognise  such  a  right  and  provide  for  such representation: see  Kalindi  v.  Tata Locomotive & Engg. Co. Ltd. [(1960) 3 SCR 407 : AIR 1960 SC 914], Dunlop

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Rubber Co. v.  Workmen [(1965) 2 SCR 139 : AIR 1965 SC 1392],  Crescent  Dyes and Chemicals Ltd. v.  Ram Naresh Tripathi [(1993) 2 SCC 115 : 1993 SCC (L&S) 360] and Indian Overseas Bank v. Officers’ Assn. [(2001) 9 SCC 540 : 2002 SCC (L&S) 1043].”

The Court then held:

“10. Learned counsel for the appellant Corporation has brought to our notice office memorandum dated 21-11- 2003 by which the prayer to engage a legal practitioner to act  as a defence assistant  was rejected. Reference was made to the Rules, though no specific reference has been made to the discretion available to be exercised in particular circumstances of a case. The same has to be noted in the background of the basis of prayer made for the purpose. The reasons indicated by the respondent for the purpose were: (a) amount alleged to have been misappropriated  is  Rs  63.67  lakhs,  (b)  a  number  of documents and number of witnesses are relied on by the respondent, and (c) the prayer for availing services of the retired employee has been rejected and the respondent is unable to get any assistance to get any other able co- worker. None of these factors are really relevant for the purpose of deciding as to whether he should be granted permission  to  engage  the  legal  practitioner.  As  noted earlier,  he  had  to  explain  the  factual  position  with reference to the documents sought to be utilised against him.  A legal  practitioner  would  not  be in  a  position to assist  the  respondent  in  this  regard.  It  has  not  been shown as to how a legal practitioner would be in a better position to assist the respondent so far as the documents in question are concerned. As a matter of fact, he would be in a better position to explain and throw light on the question of acceptability or otherwise and the relevance of the documents in question. The High Court has not considered these aspects and has been swayed by the fact  that  the  respondent  was  physically  handicapped person and the amount involved is very huge. As option to  be  assisted  by  another  employee  is  given  to  the

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respondent, he was in no way prejudiced by the refusal to permit engagement of a legal practitioner. The High Court's  order  is,  therefore,  unsustainable  and  is  set aside.”

21. Given the above conspectus of case law, we are of the view that

there  is  no  right  to  be  represented  by  a  lawyer  in  the  in-house

proceedings contained in paragraph 3 of the Revised Circular dated

01.07.2015, as it is clear that the events of wilful default as mentioned

in paragraph 2.1.3 would only relate to the individual  facts of  each

case.  What  has  typically  to  be  discovered  is  whether  a  unit  has

defaulted  in  making  its  payment  obligations  even  when  it  has  the

capacity to honour the said obligations; or that it has borrowed funds

which are diverted for other purposes, or siphoned off funds so that the

funds have not  been utilised for  the specific  purpose for  which the

finance  was  made  available.  Whether  a  default  is  intentional,

deliberate, and calculated is again a question of fact which the lender

may put to the borrower in a show cause notice to elicit the borrower’s

submissions on the same. However, we are of the view that Article

19(1)(g) is attracted in the facts of the present case as the moment a

person  is  declared  to  be  a  wilful  defaulter,  the  impact  on  its

fundamental right to carry on business is direct and immediate. This is

for  the  reason  that  no  additional  facilities  can  be  granted  by  any

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bank/financial  institutions,  and  entrepreneurs/promoters  would  be

barred  from  institutional  finance  for  five  years.  Banks/financial

institutions can even change the management of the wilful defaulter,

and a promoter/director of a wilful defaulter cannot be made promoter

or director of any other borrower company. Equally, under Section 29A

of the Insolvency and Bankruptcy Code, 2016, a wilful defaulter cannot

even  apply  to  be  a  resolution  applicant.  Given  these  drastic

consequences,  it  is  clear  that  the Revised Circular,  being in  public

interest, must be construed reasonably. This being so, and given the

fact  that  paragraph  3  of  the  Master  Circular  dated  01.07.2013

permitted the borrower to make a representation within 15 days of the

preliminary decision of the First Committee, we are of the view that

first and foremost, the Committee comprising of the Executive Director

and  two  other  senior  officials,  being  the  First  Committee,  after

following paragraph 3(b)  of  the Revised Circular  dated 01.07.2015,

must give its order to the borrower as soon as it is made. The borrower

can then represent against such order within a period of 15 days to the

Review  Committee.  Such  written  representation  can  be  a  full

representation on facts and law (if any). The Review Committee must

then pass a reasoned order on such representation which must then

be  served  on  the  borrower.  Given  the  fact  that  the  earlier  Master

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Circular  dated  01.07.2013  itself  considered  such  steps  to  be

reasonable, we incorporate all  these steps into the Revised Circular

dated 01.07.2015.  The impugned judgment  is,  therefore,  set  aside,

and the appeals are allowed in terms of our judgment. We thank the

learned Amicus Curiae, Shri Parag Tripathi, for his valuable assistance

to this Court.

…………………………J.                                          (R.F. Nariman)

…………………………J.  New Delhi (Vineet Saran) May 08, 2019.

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