1. Petitioners case is that Respondent No. 1 – IDBI Bank acted illegally, arbitrarily and in violation of the RBI Master Circulars dated 01.07.2013 and 01.07.2015 by classifying them as well as Respondent No. 2 company as ‘Willful Defaulters’. It is contended that the impugned action is contrary to the principles of natural justice as laid down by the Supreme Court in State Bank of India v. Jah Developers Pvt. Ltd. (Civil Appeal No. 47761 of 2019). Petitioners state that the orders dated 08.07.2021 (communicated on 12.07.2021) of the Identification Committee and the confirming order dated 27.08.2021 (communicated on 26.10.2021) of the Review Committee are fundamentally-illegal as they fail to comply with mandatory procedural safeguards, and therefore require interference.

               1.1. Petitioners state that they were formerly the management of Respondent No. 2 company which is undergoing CIRP pursuant to orders of the NCLT, Hyderabad Bench in CP(IB) No. 645/HDB/2018. The NCLT admitted the company into CIRP on 05.06.2023. Due to deficiencies in public announcement and other procedural shortcomings, the NCLT restarted the CIRP process by order dated 21.02.2025. It is stated, Petitioners are part of the suspended management and that wrongful classification as willful defaulters affects their rights in the CIRP, including their eligibility to submit a Resolution Plan for the MSME under the statutory scheme.

               1.2. Petitioners state that Respondent No. 2 company was engaged in the business of manufacturing hybrid seeds and is uniquely dependent on climatic conditions. In 2012-13, severe drought occurred which seriously affected agricultural output across several states. As a result, the company's seed production collapsed, resulting in heavy financial losses and severe liquidity crisis. It is maintained that default in repayment stemmed directly from this natural calamity, which was entirely beyond their control. At the critical time when the company was attempting to restructure and revive operations, the consortium banks, including Respondent No. 1, failed to release sanctioned working capital. They allege that the banks did not release the approved Pre-CDR PD amounts in 2012, caused delay in approval of the CDR package, delayed execution of Master Restructuring Agreement, and made only partial disbursement of funds even after approval. They contend that some banks did not participate in the PDR, and that banks refused to release Rs. 15 crores required for packing and placing seeds in the market in 2013 and 2014. This led to inability to place stock on time, high sales returns, significant inventory costs, cash flow deterioration, loss of manpower and eventual operational slowdown.

               1.3. Petitioners state that these circumstances demonstrate that default was not willful. They assert that there was never any diversion of funds with dishonest intent or deliberate decision not to repay. For several years prior to drought, the Company had diligently serviced interest and repayments. It is pointed out that they made multiple presentations to Joint Lenders' Meetings, wrote letters to bank chairpersons and officials, approached state and central government ministries, and submitted financial information to lenders, showing their continuous efforts to revive the business. It is also contended, the mandatory safeguards prescribed under the RBI Master Circular were not followed. Show Cause Notice dated 29.06.2020 was issued by a Deputy General Manager, who was not a member of the Identification Committee, therefore, was not competent to issue the notice. The Petitioners emphasize that RBI Circular requires that show cause notice must be issued by the Identification Committee itself after considering evidence, and that a non-committee officer issuing the notice demonstrates lack of application of mind. Reliance is placed on the decision in Suryajyothi Infotech Ltd. v. Union of India (WP No. 5030 of 2023), wherein it was held that non-committee issuance of a notice is invalid.

               1.4. Petitioners state that there was withholding of material documents, which prevented them from giving an effective reply. Respondent Bank failed to furnish the forensic audit report, even though it was the principal basis of the allegations in the show cause notice. Between 14.08.2020 and 16.03.2021, Petitioners repeatedly requested the audit report. Only after directions of this Court in Writ Petition No. 6544 of 2021, by order dated 16.04.2021, did Respondent No. 1 provide the forensic audit report on 11.05.2021. Petitioners state that due to Covid restrictions, their auditors could not visit their godown and other locations to complete reconciliation, leading them to seek reasonable time.

               1.5. Petitioners highlight the chronological sequence demonstrating non-compliance. They refer to the show cause notice dated 29.06.2020, their reply on 13.07.2020, repeated requests for the audit report, eventual disclosure on 11.05.2021, their request for time on 25.05.2021, the first committee order dated 08.07.2021 (communicated on 12.07.2021), their reply dated 27.07.2021, the confirming order of 27.08.2021 (communicated on 26.10.2021), and publication of their photographs as willful defaulters on 31.01.2022. They submit that this sequence shows serious procedural lapses.

               Petitioners also contend that order of the Identification Committee dated 08.07.2021 is a non-speaking order which does not deal with any of the detailed replies given by them. They argue that the Committee merely reproduced vague allegations and did not examine the evidence or explanations provided, especially with regard to group company transactions, routing of bank accounts and the drought-related impact. They also contend that the order of the Review Committee dated 27.08.2021 suffers from the same defects and is not signed by the Committee members but only by a Chief General Manager. It is stated, the seven-step procedure mandated by the RBI Circular, including issuance of notice by the Committee itself, providing all relied on documents, affording personal hearing, passing a reasoned order, affording a reasonable opportunity to represent against the first order, and consideration by a properly constituted Review Committee, were not followed. They submit that this renders the proceedings void.

               1.6. Petitioners contend that Respondent No. 1 has wrongly alleged diversion of funds to group companies. They state that all group entities were genuine seed and biotechnology companies engaged in various aspects of agricultural research, seed production, biotechnology, and marketing. It is stated, group companies had substantial operations, dealer networks, and a long-standing role in the industry. They refer to inter-company agreements, shared infrastructure and historic contributions of group companies, including turnover and their role in the Vibha Consortium. They assert that these transactions were commercially justified and known to lenders.

               1.7. Petitioners further explain that routing of funds through Bank of Baroda and RBL Bank occurred only because the Income Tax Department had attached the company's TRA and consortium accounts in 2013 under orders dated 27.03.2013. They state that such attachment compelled the company to temporarily operate through those banks. They also assert that the company had disclosed the relevant bank statements to SBI and other consortium lenders through email dated 22.09.2014, and that in a JLM held on 26.09.2014 the lenders acknowledged that Petitioners submitted the relevant statements. They maintain that routing of funds was neither hidden nor violative of consortium terms. Petitioners state that their explanations regarding receivables from group companies, reconciliation difficulties due to stock being withheld by C&F agents, and time-barred claims under the Limitation Act were not considered by the bank in either of the orders.

               1.8. Petitioners assert that declaration of willful default has serious consequences including reputational harm, inability to access credit, bar on participating in the banking system and disqualification from submitting a Resolution Plan for an MSME under the IBC. They state that this wrongful declaration continues to operate as a "continuing tort" under Section 22 of the Limitation Act, as the consequences are ongoing. Only three consortium banks, namely SBI, IDBI (Respondent No. 1) and PNB, declared them as willful defaulters, while the other consortium members did not, indicating lack of uniformity and arbitrariness. Petitioners clarify that Writ Petition No. 27759 of 2024 filed earlier was withdrawn on 30.12.2024 with liberty to file a fresh one, because it had improperly impleaded all consortium banks in a single petition even though the proceedings of the banks were separate. They state that the present petition has been filed to correct that procedural error. They ultimately submit that the entire proceedings of Respondent No. 1 are illegal, arbitrary, violative of natural justice, violative of the RBI Circulars, and violative of Articles 14 and 21 of the Constitution. They pray for quashing of the orders dated 08.07.2021 and 27.08.2021 and for consequential relief.

2. On the other hand, Respondent No. 1 submits that Writ Petition is fundamentally not maintainable as IDBI Bank Limited does not fall within the definition of "State" under Article 12 of the Constitution of India. It is emphasized that, though IDBI Bank was originally constituted under the Industrial Development Bank of India Act, 1964 as a statutory corporation, the legal status of the institution changed entirely after the enactment of the Industrial Development Bank (Transfer of Undertaking and Repeal) Act, 2003. By virtue of Section 3 of the 2003 Act, the undertaking of the Development Bank was transferred to and vested in a company incorporated under the Companies Act, viz. IDBI Bank Limited. Hence, the Bank operates as a company without deep or pervasive governmental control.

               2.1. In support of the above contention, Respondent No.1 places reliance on Mrinmayee Rohit Umrotkar v. Union of India (2020 SCC Online Bom 3664), where the Bombay High Court examined the nature of control exercised by the Government over IDBI Bank. Paragraph 19 of the said judgment is as under:

               "......that transition of Development Bank from body Corporate to Company (IDBI Bank Limited) without deep and pervasive administrative, financial and functional control of Government of India over such Company shows that the IDBI Bank Limited is not an undertaking of Government of India."

               2.2. It is also stated, this judgment squarely applies and demonstrates that IDBI Bank cannot be subjected to writ jurisdiction, particularly for disputes arising out of loan transactions. Respondent No. 1 further relies on the judgment in All India IDBI Officers Association v. Union of India (2022 SCC Online Bom 2693). The relevant observations are as under:

               " that the government does not exercise any administrative and functional control of IDBI Limited and thereby Development Bank does not fall within the meaning of "State' under Article 12 of Constitution of India."

               It is argued that this authoritative pronouncement reinforces that Bank cannot be treated as an instrumentality of the State, therefore, proceedings under Article 226 are misconceived.

               2.3. This Respondent next relies on the Supreme Court's decision in Federal Bank Ltd. v. Sagar Thomas ((2003) 10 SCC 733), which clarifies that private banks or companies engaged in commercial activities, even though regulated by RBI, are not discharging public functions so as to attract writ jurisdiction. The following extract from paragraph 733 is relied upon:

               " Merely because Reserve Bank of India lays the banking policy system or in the interest of the banking system or in the interest of monetary stability or sound economic growth having due regard to the interests of the depositors etc., as provided under Section 5 (ca) of the Banking Regulation Act, 1949 Act No. 10 of 1949 does not mean that private companies carrying on the business or commercial activity of banking, discharge any public function or public duty: merely regulatory provisions to ensure that commercial activity carried on by private bodies work within a discipline, neither confer any status upon the company nor put any obligation upon it which may be enforced through issuance of a Writ Under Article 226".

               It is stated, this principle applies fully to the present case, especially since the Bank's decision to classify an account as a willful defaulter is purely contractual and commercial in nature.

               2.4. Respondent No. 1 also cites the Supreme Court's decision in Phoenix ARC (P) Ltd. v. Vishwa Bharati Vidya Mandir ((2022) 5 SCC 345), where it was held that writ petitions are not maintainable against private financial institutions for actions under the SARFAESI Act. Paragraph 18 reads as under:

               “ ...... Even otherwise, it is required to be noted that a writ petition against the private financial institution ARC (Assets Reconstruction Company) the Appellant herein under Article 226 of the Constitution of India against the proposed action/ actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable...

               …... If proceedings are initiated under the SARFAESI Act and for any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no writ petition would lie and/or is maintainable and/or entertainable "

               It is stated, the legal principle laid down is of wider application and that Courts must be slow to entertain writ petitions arising out of banking disputes, particularly those concerning credit discipline.

               2.5. Respondent No. 1 denies all the allegations except those specifically admitted. It states that Petitioners, in their capacity as promoters and directors of Respondent No. 2 company, availed substantial credit facilities from IDBI Bank as a member of the consortium. The credit facilities were availed pursuant to loan agreements, hypothecation deeds and mortgages over immovable properties. The Bank emphasizes that Petitioners, as directors and guarantors, are responsible for repayment of dues and that their internal disputes have no bearing on the classification. It is also stated, Respondent No. 2 committed multiple breaches of loan terms, defaulted in repayment, and became irregular, culminating in classification as Non-Performing Asset (NPA) on 30.04.2013. Thereafter, the consortium lenders, with State Bank of India as lead bank, filed recovery proceedings in DRT Hyderabad on 11.04.2016 in OA No. 417/2016, later renumbered TA No. 2556/2017 for recovery of Rs. 798.48 crores. Other banks also initiated standalone suits which were decreed. These facts demonstrate the chronic and serious nature of defaults.

               2.6. Respondent No. 1 asserts that Petitioners lacked bona fide intention to repay dues and instead adopted a strategy of filing repeated legal proceedings to delay recovery. After classification as NPA, the Bank initiated willful defaulter proceedings in 2020 strictly in compliance with the RBI Master Circular dated 01.07.2015. The definition of ‘willful default’ under Clause 2.1.3 of the RBI Circular and reproduces the extract:

               " 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 utilized 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 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 obligation to the lender and has also disposed of or removed the movable fixed assets or immovable property given for the purpose of securing a term loan without the knowledge of the bank/lender. The identification of the wilful default should be made keeping in view of the track record of the borrowers and should not be decided on the basis of isolated transactions/incidents. The default to be categorised as willful must be intentional, deliberate and calculated."

               2.7. It is argued that conduct of Petitioners fell squarely within these categories, including failure to route funds through consortium accounts, diversion of funds to related entities, and failure to repay despite having capacity. Respondent No. 1 denies the allegation of denial of documents or hearings. It reiterates that Petitioners were given four opportunities for personal hearing through notices dated 14.08.2020, 31.12.2020, 16.03.2021 and 12.05.2021, fixing hearings on 26.08.2020, 12.01.2021, 24.03.2021 and 29.05.2021 respectively. At each instance, Petitioners refused to attend, citing reasons that the Bank considers unjustified or dilatory. It is further stated, pursuant to the order in Writ Petition No. 6544 of 2021 dated 16.04.2021, the forensic audit report was shared with Petitioners on 11.05.2021 and it demonstrates transparency and compliance with directions.

               2.8. The Willful Defaulter Identification Committee (WDC) passed its order on 08.07.2021 after considering the material available; the order was communicated on 12.07.2021 and Petitioners submitted their representation dated 27.07.2021 to the Review Committee. The Review Committee considered the representation and confirmed the WDC's classification in its meeting on 27.08.2021. This decision was conveyed through letter dated 26.10.2021. After the classification attained finality, public notices dated 02.02.2022 were issued in Financial Express and Nava Telangana, in accordance with the RBI Circular. Respondent No. 1 denies the allegation of violation of natural justice, stating that Petitioners had every opportunity to defend themselves and submit documents, but deliberately avoided participation. They rely on the judgment in Writ Appeal Nos. 680, 681 and 701 of 2022 dated 07.02.2024, relevant extract is as under:

               " 13. Thus, from perusal of para 3 of the aforesaid Master Circular, it is evident that it does not contain any requirement that the order passed by the first level committee should disclose the constitution of the first level committee. It is also pertinent to note that the order of the first level committee attains finality only after it is confirmed by the review Committee.

               This Respondent submits that this extract conclusively shows that issuance of a notice by a DGM does not violate the Circular as long as the Committee itself takes the decision.

               2.9. Respondent No. 1 cites the Calcutta High Court's judgment in Gowri Prasad Goenka v. SBI (W.P.No. 171 of 2021), paragraph 26 of which reads as under:

               " The Petitioner, in the said notices, was given opportunity to make submissions in writing within 15 days...... and it was clearly mentioned that the IC would pass necessary orders thereupon. The entire proceeding and proposed actions referred to in both notices were taken by the IC, which had ample jurisdiction to do so under the RBI Master Circular. As such, the Deputy General Manager merely communicated the show cause notices to the petitioner and did not intrude the jurisdiction of the IC in any manner whatsoever. Thus, placing reliance on the dual Division Judgments in Union Bank of India, it can safely be held that the issuance of notice by the Deputy General Manager ipso facto did not invalidate the notice".

               It is argued that this reinforces that communication of notice by the DGM does not invalidate proceedings.

               2.10. Respondent No. 1 also relies on paragraph 24 of the Supreme Court's judgment in SBI v. Jah Developers Pvt. Ltd. ((2019) 6 SCC 787) and states that all procedural steps indicated by the Hon’ble Supreme Court were followed:

               " Para 3 of the Master Circular dated 1-7-213 permitted the borrower to make representation within 15 days of the preliminary decision of the First Committee, after following Para 3 (b) of the Revised Circular dated 1-7-2015, 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 of facts and law (if any). The Review Committee must then pass a reasoned order on such representation which must be served on the borrower."

               2.11. Respondent No. 1 further states that forensic audit revealed that in FY 2015, despite sales of Rs. 76.79 crores, only Rs. 1.08 crores were routed through SBI and none through IDBI Bank, while accounts with RBL and BOB were used. It also states that related party receivables were unexplained and not recovered. Thus, the Bank asserts that diversion and misuse of funds were clear. Respondent No. 1 submits that the present writ petition is filed after more than three years and therefore, suffers from delay and laches. They accuse Petitioners of not cooperating in CIRP proceedings and of obstructing lender efforts to initiate CIRP before NCLT. All actions were fully compliant with the RBI Master Circular and judicial guidelines, hence, prays for dismissal of the Writ Petition with costs.

3. Heard Sri Raja Sripathi Rao, learned Senior Counsel representing Smt. Kanumuri Kalyani, learned counsel for petitioners, Sri V.V.S.N. Raju, learned counsel for Respondent No.1, Sri G.P. Yash Vardhan, learned counsel for Respondent No.2 and M/s N Legal, learned counsel on behalf of Respondent No.3.

4. Having considered the rival submissions and having perused the material placed on record, including the impugned orders dated 08.07.2021 and 27.08.2021, RBI Master Circulars dated 01.07.2013 and 01.07.2015, and judgments relied upon by both the parties, the following issues arise for consideration: (i) maintainability of Writ Petition against Respondent No. 1, (ii) whether the proceedings culminating in declaration of Petitioners as willful defaulters suffered from any violation of the RBI Circulars or the principles of natural justice, and (iii) whether the impugned orders warrant interference in exercise of writ jurisdiction.

5. As regards the objection on maintainability, Respondent No. 1 urged that IDBI Bank Limited does not fall within the definition of "State" under Article 12 of the Constitution, consequently, Writ Petition, which arises out of a banking transaction is not maintainable. Reliance has been placed by Respondents on the decisions of the Bombay High Court in Mrinmayee Rohit Umrotkar’s case (supra) and All India IDBI Officers Association and on the principle laid down by the Hon’ble Supreme Court in Sagar Thomas’s case (supra), wherein it has been held that writ jurisdiction cannot ordinarily be invoked against private banking institutions discharging purely commercial functions. Petitioners, on the other hand, contend that proceedings impugned stem from statutory obligations traceable to the RBI Master Circular on Wilful Defaulters, therefore, the matter falls within the supervisory jurisdiction of this Court under Article 226. In support of this submission, reliance is placed on the judgment of the Hon’ble Supreme Court in M/s Sardar Associates and Others v. Punjab & Sind Bank (2009 (8) SCC 257), wherein it has been held that, notwithstanding the non-governmental character of a bank, its actions would be amenable to judicial review when they are required to conform to binding directions issued by the Reserve Bank of India. In view of the same, this Court is of the opinion that challenge in the Writ Petition is directed not at the commercial wisdom of the Bank, but at the alleged violation of mandatory procedural safeguards prescribed under the RBI Master Circular. In the light of the legal position laid down in Sardar Associates, and bearing in mind that impugned classification as willful defaulters arises from a regulatory framework having statutory force, this Court holds that this Writ Petition is maintainable. Nevertheless, since elaborate submissions have been advanced on the merits of the controversy, this Court proceeds to examine those issues as well.

6. On the merits of the challenge to the willful defaulter proceedings, Petitioners urged that show cause notice was invalid as it was issued by a Deputy General Manager rather than the Identification Committee itself, that material documents including forensic audit report were not timely furnished; Petitioners were denied effective opportunities of hearing; and that orders of both the Identification Committee and the Review Committee were non-speaking and mechanical. Petitioners relied upon Suryajyothi Infotech Ltd.’s case (supra) to contend that non-committee issuance of show cause notice invalidates the proceedings. They have also emphasized that the alleged defaults were not intentional but arose out of extraordinary factors including drought and non-release of funds by consortium lenders.

7. However, Respondent No. 1 has demonstrated, with reference to the record, that Petitioners were issued notices of hearing on multiple occasions but declined to appear; that forensic audit report was furnished promptly following directions of this Court in Writ Petition No. 6544 of 2021; the Identification Committee considered the material available and passed its order, and that the Review Committee afforded Petitioners an opportunity to submit representation which was duly considered. The legal position clarified in Writ Appeals No. 680, 681 and 701 of 2022 as well as in the Calcutta High Court's decision in Gowri Prasad Goenka’s case (supra), makes it clear that communication of a notice by an officer such as a Deputy General Manager does not vitiate proceedings so long as the Identification Committee itself undertakes the decision-making process. This Court finds merit in the Respondent's contention that Petitioners' grievance in this regard is misconceived.

8. The relevant extracts of the RBI Master Circular dated 01.07.2015, as considered in SBI v. Jah Developers, mandate issuance of a preliminary order by the first committee, followed by an opportunity to the borrower to make a representation, and thereafter a reasoned decision by the Review Committee. Respondent Bank has placed material to show that each of these steps was adhered to. Petitioners' principal challenge is that they were unable to meaningfully respond due to delayed access to documents. However, the record does not establish that Petitioners, after receiving the forensic audit report on 11.05.2021, were prevented from submitting a detailed response; nor is there any evidence that they availed the opportunities for personal hearing fixed on four separate dates.

9. On the allegation that the impugned orders are non-speaking, the Court notes that while the orders may not be elaborate, they do record the basis of the conclusion that Petitioners had diverted funds, failed to route transactions through consortium accounts, and failed to recover receivables from related entities. The forensic audit findings relied upon by the Committee indicate that substantial transactions were routed outside the consortium accounts and that related-party receivables remained uncollected. The scope of judicial review in cases involving commercial and financial assessments by expert committees is limited and does not extend to re-appreciating factual conclusions unless they are shown to be perverse, arbitrary or unsupported by any material. No such perversity or illegality has been demonstrated.

10. Petitioners contended that default was caused due to drought conditions and non-release of funds by lenders. These are issues which were within the knowledge of Petitioners for several years and have been the subject of earlier litigations and lender discussions. While the circumstances surrounding financial distress may be relevant in determining capacity or intent, the willful defaulter framework under the RBI Circular focuses on conduct, including diversion of funds and non- routing of transactions. Petitioners are unable to substantiate that the Committees failed to consider relevant materials or considered extraneous materials. The Court finds no procedural violation sufficiently grave to vitiate the proceedings.

11. As regards delay and laches, the impugned orders are dated 08.07.2021 and 27.08.2021, while the present writ petition has been filed more than three years thereafter. Petitioners' plea that declaration constitutes a continuing wrong is not persuasive in the context of the decisions of the Supreme Court holding that willful defaulter declarations are amenable to challenge only within a reasonable period. Petitioners' earlier Writ Petition having been withdrawn on technical grounds does not furnish a fresh cause of action.

12. Upon thorough consideration of the factual background and the legal submissions advanced, this Court is unable to discern any material to suggest that proceedings undertaken by Respondent No. 1 were in derogation of the RBI Master Circulars or in breach of the requirements of natural justice. Petitioners have not demonstrated existence of any jurisdictional infirmity, substantial procedural lapse, or perversity in the decision-making process that would justify the exercise of supervisory jurisdiction under Article 226 of the Constitution.

13. For the reasons stated supra, this Court finds no grounds to interfere with the impugned proceedings. Accordingly, the Writ Petition stands dismissed. No costs.

14. Consequently, the miscellaneous Applications, if any shall stand closed.