Delhi HC Sets Aside Bank's Order Declaring Bizman Ratul Puri As Wilful Defaulter

NEW DELHI: The Delhi High Court has set aside Bank of Baroda's decision declaring businessman Ratul Puri as a wilful defaulter under Reserve Bank of India (RBI) guidelines.

The court said the forensic audit report did not verify the source of funds invested in the subsidiaries of Moser Baer India Ltd (MBIL), with which Puri was earlier associated, and the bank could not have issued show cause notice to the petitioner for wilful default without verifying the source of funds.

"Unless the funds that were invested were found to be borrowed funds, the respondent- bank did not have jurisdiction to invoke the Master Circular. The very genesis of 'diversion' or 'siphoning of' funds is dependent on the funds being borrowed funds," Justice Purushaindra Kumar Kaurav said in a 92-page judgement passed on February 29.

The court said the reliance placed by the bank on the forensic audit report is clearly misconceived as the report does not record any conclusion regarding diversion or siphoning of funds qua Puri. The reliance placed by the bank on the forensic audit report to issue show cause notice of wilful default to the petitioner is clearly misplaced, it added.

It further said that the finding of the bank's identification committee, which was also confirmed by the review committee, on the allegation that MBIL has made substantial investment in subsidiaries and related entities amounting to Rs 1586.75 crore as on December 31, 2013, to the extent that it holds that the investments by MBIL in its subsidiaries amounted to 'diversion' and 'siphoning of' funds within the meaning of the RBI's Master Circular on Wilful Defaulters, 2015 is unsustainable.