Authority: Calcutta High Court (Civil Appellate Jurisdiction)
Order Date: 14 July 2026
Case Overview
- Appeal M.A.T. No. 820 of 2026 IA No. CAN 1 of 2026 filed by SREI Equipment Finance Limited (appellant) against BSCPL Infrastructure Limited and others (respondents).
- Originating judgment and order dated 8 April 2026 (WPA 3211 of 2026) by a Single Judge quashed the show‑cause notice dated 15 January 2026 and the extract of the Wilful Defaulter Identification Committee (WDIC) meeting held on 18 December 2025, on the ground that the notice did not specify the incidents of wilful default.
- The dispute centres on whether the respondents – a corporate guarantor (respondent 1) and a personal guarantor (respondent 2) of a joint‑venture (JV) named BSC‑C&C were liable to be declared wilful defaulters under the Reserve Bank of India (RBI) Master Circular.
- The JV had obtained multiple credit facilities from SREI; the corporate guarantee was executed by respondent 1 and a personal guarantee by respondent 2. The JV defaulted on repayment of principal, interest, compound interest, liquidated damages and other charges.
- SREI invoked the corporate guarantee on 6 February 2025 and the personal guarantee on 13 August 2025. A CIBIL report of the borrower dated 13 November 2025 (approximately 100 pages) was also relied upon.
- The amount claimed as outstanding as on 24 January 2025 was Rs 181,66,49,616.09, broken down as follows:
- Contract 178448: Rs 8,50,10,241.17
- Contract 179178: Rs 8,56,79,781.30
- Contract 179179: Rs 9,35,90,952.13
- Contract 179180: Rs 8,67,73,158.49
- Contract 179181: Rs 49,64,60,294.73
- Contract 179182: Rs 51,58,95,038.94
- Contract 179183: Rs 45,32,40,139.33
- Total outstanding: Rs 181,66,48,616.09 (as per the notice dated 24 January 2025).
- The appellants argued that the respondents, despite having the capacity to pay (evidenced by servicing other lenders), wilfully neglected to honour the guarantees and had disposed of assets, satisfying the definition of wilful default under Clause 3 (xix)(B) of the Master Circular.
- Respondents contended that the show‑cause notice was vague, did not disclose the specific material on which the WDIC relied, and that the pending arbitration proceedings barred initiation of wilful‑default proceedings.
- The court examined the relevant provisions of the RBI Master Circular, including the definition of wilful default, the mechanism for identification (Clause 5), and the requirement that a show‑cause notice must disclose all material facts on which it is based.
- Precedents cited included Gouri Prasad Goenka v. State Bank of India (2021 SCC Online Cal 1942), Kaustuv Ray v. IDBI Bank (2023 SCC OnLine Cal 656), and Techno Prints v. Chhattisgarh Textbook Corporation (2025 INSC 236), emphasizing limited judicial interference with internal NBFC procedures and the need for specific allegations.
Final Outcome
- The appellate court upheld the Single Judge’s decision to quash the show‑cause notice dated 15 January 2026 and the accompanying WDIC meeting extract, on the basis that they were vague and failed to disclose the specific incidents of wilful default, thereby violating principles of natural justice.
- The court did not accept the Single Judge’s finding that the matter was not a case of wilful default; it held that such a determination is premature and beyond the jurisdiction of the writ court at this stage.
- The Identification Committee was directed to re‑examine the evidence, ensure compliance with the detailed procedural requirements of Clause 5 of the Master Circular, and, if satisfied that wilful default has occurred, issue a fresh, detailed show‑cause notice containing specific dates, transactions, and facts.
- The appeal and the accompanying application were disposed of on 14 July 2026. Parties may seek a new notice in accordance with the circular; urgent certified copies of the judgment can be obtained upon formal request.
Topics: Wilful Default, RBI Master Circular, NBFC Litigation