Promoters challenged their willful default classification by a consortium bank under RBI Master Circulars, citing drought-related distress and natural justice violations. The court held no jurisdictional error or mandatory procedural omission was shown and dismissed the petition for gross unexplained delay.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
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[33001
IN THE HIGH COURT FOR THE STATEOF TELANGANA AT HYDERABAD (SPecial Original J urisdiction)
MONDAY, THE FIRST DAY OF DECEIVBER TWO THOUSAND AND TWENTY FIVE
PRESENT
THE HON'BLE SRI JUSTICE NAGESHBHEEMAPAKA
WRIT PETITION NO: 11743 OF 2025
Between:
...PETITIONERS
AND
...RESPONDENTS
Petition under Article 226 of lheConstitutionof lndia prayingthat in the circumstances stated in the affidavitfiledtherewith' the High Court maybe pleased to pass appropriate writ, order or directionparticularlya writ of mandamus declaring the order ofldentification committee/first committeeon Wilful Default dated 26.O3.2018 andOrder of ReviewCommitteedated 18.07.2018 both received videcommunicationdated25.03.2019as illegal, arbitrary and violative of theRBI Master's Circulars on willfuldefault more particularly, the Master Circular Dated 0't .7.2015, violativeof principlesof natural
justice, violative of articles 14 and 21 of the constitutior lf lndia and issue a consequential order setting aside the same.
lA NO: 1 OF 2025
Petrtion under Section 15'1 CPCpraying that in the;ircumstancesstated in the affidavit filed in support of thepetition, the High CoL1 may be pleased to suspend the operation of the Order of ldentification committe/ firstcommitteeon Wilful Default dated 26.03.2018 and Order of Revic' I Committeedated 18.O7.2018 both .received vide communication dated25.O'..2O19issuedby the respondent No.1 herein, classifying the respondent Nc. Icompany andthe petitioners as willful defau lters.
lA NO: 3 OF 2025
Petition under Section 15'1 CPCpraying that in the i'cumstances stated in the affidavit filed in support of thepetition, the High Co I t may be pleased to stay the operation. effect. and implementation of the imrr rgned declaration of "Wilful Default" vide Order of ldentification committee/ first committee on Wilf ul Default dated 26.03.2018 and Order of Review Committ e dated 18.07.2018 both received vide communication dated 25.03.20'19 issu: I by the respondent No 1 frerein during thependency of thepresent writ petition and d irect Respondent No. 2 of l\ills Vibha Agrotech Ltd. To consid: the resolutionplan submitted by the Petitioners on its own merits, without beri rg influenced by the impugned declaration of"Wilful Default".
lA NO: 2 OF 2025
Between:
State Bank of lnpia. Rep. by its Deputy General [\1r nager SAM Branch, Secunderabad, 5"' Floor, Rear Block of H MW SSB(),mpound, D.No. 6-291 5, Khairathabad, Hyderabad
...PET|T|ONEIl RESPONDENT No.1
AND
g-2-2g3l82tJ-11119, Plot No.O-1 11, Road No. 77, Jubilee Hills, Hyderabad50063
...RESPONDENTS/PETITIONERS
(Respondent No.3 and4 arenot necessary partiesin this petition)
...RESPONDENTS/RESPONDENTS
Petition under Section151 CPC praying that in the circumstances stated in the affidavit filedin supportof the petition, the High Courtmay be pleasedto vacate the lnterim orderdated.07.05.2025 passedin wP No.11743 o',f 2025.
Counsel for the Petitioner:SMT. KANUMURTKALYANI
Counsel forthe RespondentNo.1:SRI AJGALRAVI BABU, S'C' FOR SBI
Counsel for theRespondents No.2 & 3: --
The Co0rt made thefollowing:ORDER
IN THE HIGH COURT FOR THE STATE OF TEL!NGANAAT HYDERABAD
HON'BLE SRI JUSTICE NAGESH BHEEM!.]'AKA
WRIT PETITION No. 11743 OF 2025
oL.t2.2025
Betwee n:
Vidyasagar Parchuri & another
F'( t i roncrs
And
State Bank of Inclia, Rep. by its Authorised Representative SAM Branch Secunderabad & two others
Rcsr: r nclt:n ts
ORDER:
Petitioners state thal Rcspondent Nl 1, a public sector bank forming part r>f a consortittrnr,l lenders tr'r Respondent No.2 compan.lr, hzrs unjustll, iltr( unlawfully classihed both the Petitioncrs and RespondcntI\ r .2 as willfu I defaulters in violatior-r of the RBI Master Circr-rlr s on u'illful default. It is stated, Respondent No.2 companyr 'r ; engagcrl in the manufacture of hybricl seeds, an activity hea<sup>i v dr:pendent on ciimatic condit ions. The unprccedented drotrq-r ol 2012-13 severely affected agricultural output across mtt iple States, resulting in crop failure and czr.rsing severc disr r ption to the
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company's sced production, re'onLtcs and liquidity.They assert that this natural calamit5zrvas Lheprimary cause offinancial disLress, lcading to temporilll, inability lo serviceloan obligations, and that theretvas nodeliberateorintentional delault on their part. It is zrlso stated, duringthis critical period, the consortium banks, including RespondentNo1, failed to releasc sanctioned u,orking capital,failed to disbursethe approved Pre-CDR Priority Debt,delayedapproval olCDR package, delayed execution ol MasterRestructuring Agreement, and made only partial disburscmentof funds.Theyalso allege that lcnders failed to releasethc requiredRs.15crores lor seed packing operations during 20 13 and 2014,thereby causing inabitity to place stock in time,leadingtosales returns, invcntory accumulation, operationaldelays,and severe liquidity stral n
1 .2. I t is their case thzlt Lhe companyhad consistently serviced loan obligations prior todrought; they madeseveral representations to government offrcials,consortium members, and JLM; and that letters and communicationswere issued requesting financial assistance. They contendthat their distress was genuine, documented and acknowledgedby the lenders on various occasions. Petitioners assert thatwillfuldefault
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proceedings of Respondent No.Isuffer from I rrld:rmental procedural delects.11. is contendcdthat show causc otict: dated 20.O8.2O16 was issued$'ithout supplyingessenliitloc'tttlrents' inciuding the lorensic auditreport, therebydeprivir:rt lrcrnof an effective opportunity to reply.Thel state that thev I tvcrtheless filec1 a detailed reply on20.09.201{r-They further ")rrLcnd that the notice dated12.03.20 l8fixing apersonaltc:tringon 26.O3.2O18 u'as issued withoutlurnishing full rr rtcrial,and that the order classi$,ingthem as u'illful defaulter-r; !'as passed on the very same day as thchearing,indicat'r P,thatthe personal hearing was a mcre formalitywitll I rrqenuine consideration.
1.3. Petitioners statc that ordersof boththe Identification Committee and tlieRevieu' Ctlrl t rittc ewere received only on 25.03.2019 anrlthat those orc crs do not constitute reasoned orders.Thcv irllege that Revie u Committee also passed its order without affordingthem an 'l)ortullity to appeal or make a representation.'lhey contendt[.rithe orders are mechanical, lacking any analytical considel-zI on of' their replies, and rnerely reiterate the allcgationsof thcshow cause notice. The forensic audit report rr/its not furnishe<it r thr:muntil directed by this Court in Writ Petition No. 6544 rt2O21,by
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order dated 16.O4 .2021 . They state that even after such disclosure, the bank did nol give them any meaningful opportunity or he aring and lhey were pursuing remedies diligently and that the delay in filing the present Writ Petition occurred due to tegal advice and the pendency of parallel matters before Lhis Court and thc NCLT.
1.4. Petitioners describe, in detail, the operational difficuitres cncountered by the company, including the seasonal nature of hybrid seeds, perishabiliff, storage requirements, regulatory inspections, seizure of substandard seeds by agricultural authorities, deterioration of inventory dueto disconnection of electricity in cold storage, and legal proceedings initiated by agricultural departments. They submit ihat these factors caused non-recovery of receivables, deterioration of stock, and inability to generate cash flows. They also address the allegations of drversion of funds. It is stated, no land was purchased during 2Ol4-75, amount reflected in the balance sheet represented earlier capital expenditure funded by a term loan from L&T Finance, and that short-termworking capital was never diverted for long-term purposes. Theyfurther state that routing of funds through Bank of Barodaalrd RBL Bank occurred solely because the Income TaxDepartment
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attached all consortiumaccounts in 2O13 under oroceedings rejecting the benefitunderSection10(1)of the Inc: le'lax ActAll statements of such accountswereluruisrl cd to thc consortium, including throughe mail dated 22.09' l01a and in the JLM held on 26.09.2014whe re SBI acknou'lcdge l receipt.
1.5. Petitioners further statethat procedur: safeguards under the Master Circular aswell as principle : of natural justice, require issuance of a speaking orcler,supplr of material, meaningful opportunity ofhearing and an indept t clent revieu, b1' the Review Committee.They contend that n< nc of thesc mandatory requirements were compliedu'ith lhe Review Committee's order is a four-pagedocumentcrl;'l aining only signatures and agenda items andis bereft of reas<r Ls.'l'hey rely on the principles enunciated inthe Master ( ircular and interpretation in S:tateBank o;f India u. Jah Det elopers Put. Ltd.1 to contend that theReviewCommittecr Lrst pass a reasoned order. Petitionersassert that the declar:I .on of willful default has severe civil andreputational consequ(lll :es, affecting their right to conduct business,right toar:r't ss financial facilities, and their eligibility toparticipate nCIRP of Respondent No.2, an MSME, under lhe ar tcndedIBC '(20r9)6 scc787
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framework pcrmittingpromoters of MSMEs tosubmit resolution plans. They contend tl-rat thcy arethe most suitable persons to revive rhe companv zrtrd that thel'|16u" submitteda resolution plan ol Rs.347 r'rores.
1.6. Petitioncrs state that only three banks,namely SBI, IDBI and PNB, have dcclared them asrvillful defaulters,and that no other consortium mcmberhas done so. They contend that serial, uncoordinated declarationswithoutconsideringthe factual contcxt violate Articles 14and2 1 . It is stated, Writ Petition No. 27759 of 20'24w'as withdrawn on technical grounds to file separate petitions agalnstdifferent banks, and thatthe present petition is hled accordingly. Causeof actionisa gontinuing one because the classificationoperatesasa continuing tort, affecting theirnghts,reputation,and liveiihood, and that Section 22 oltlre LimitationAct applies.
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of Senior Civil Judge,Hyderabad,wherein thev I tve :rlready challenged declaration of rvillfuldefault.Itis t:o'r i ndeclthat subject matter andcauseol action in thc presen \ /rit l)etition are substantially the sameas those in the pencili 3civil srtil, therefore, this Writ Petitionis liable to be disnr I sccl on the ground of suppression offacts and also on th('rouncl that parallel proceedings on the sameissuc arc impcrtni..;rblt in lau'' 2.1. It is also stated, Petitionershad carlic challengcd related proceedings in WritPetition No. 6544 of 2 . I1, rvherein thrs Court directedthe Bank or-rly to furnishthe f r-r'nsic audit report and granted libertyto Petitioners to apper t l>c tbre the Committee. It is emphasizedthat this Court did r rt set aside any proceedings, nor did itexpress any viewon the ncritsof the u,illful defaulter classification.Accordin€(to the t ink, despite the Court's direction,Petitionersdid not appee Ilrctore the Committee, thus, failed toavail the opportunit'' alforded to them. It is argued thatPetitioners, having failed to ' ( l Llpon the liberty grantcd, cannot now complainof violatrr Iol- natural justice.
2.2. Respondent No. 1 submits thatr:la s ;ificationo[ Petitioners as willful defaulters was made strictlyjt,lccordance with the RBI Master Circular dated O 1.07.20L i ThcBank
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asserts that ai1 the mandatoryproceduralrequirementswere duly complied u'ith. Itis statcd,show causenotice was issuedto Petilioncrs on 2O.0il.2O 16, towhich thcy submitteda reply dated 20.O9.20 16. Thereafter, apersonalhearing noticedated l2.O3.2}la was issued, callingupon them to appear before the Willful Defaulter IdentificationCommittee A personal hearing was duly conclucted on26.O3-2018,following which the Iden[ification CommiLtec, uponevaluatingthe materialplaced before it, passed its orderclassifying Petitioners as u'illful defaulters on the samedate- TheReviewCommittee subsequently consideredPetitioners' representationand confirmed the decision ofthe IdentihcationCommitteeinits order dated la.O7 -2018.
2.5. The Bank states thatPedtionershad deliberately defaulted on theirrepayment obligationsnotwithstanding their apparent financial capacity torepay. The account had been classified as a Non-PerformingAsseton 3O.O4.2O13due to persistent defaults. Respondent No.1 asserts that Petitioners misappropriated and diverted funds,failed toroute sale proceeds through the TRA and consortiumaccounts,and violated the norms governing utilization ofworking capital.The Bank relies on the findings recorded duringthe lending
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relationship, including alleged diversionoffun c s togroup entities, alleged deployment of short-termfunds l, rlc't-tg-tcrn-t purposes, and alleged non-routing o[proceccisrhroughthc' designated accounts. Respondcnt No. Ifurrht rstalL-sthzlt Petitioners have been declared as willfuldefaulter; not only tx' the State Bank of India butalso by IDBIBank and Punjzrtr National Bank. Multiplicity of willful defaultdc: arar ions lrv different consortium lenders, according toRespor Cent No. 1, reinforces the conclusion that the Petitioners : rnductlr'zrs deliberatc, intentional, and in violation of theirolrli latiot'ts-[t is also submitted that the Petitioners did not avaithc rcvieu' mechanism contemplated under Lhe RBI Maste rI ircular,ztnd therefore cannot now be permitted to assail the lrdersaftt:r seleraI years.
2.4 . The Bank states that the corpora t :de btoris presently undergoing Corporate Insolvency Resolrr ionProcess (CIRP), and Petitioners, who form part of th: suspeurlcrl management, have repeatedly attempted to obstrtrrt alldd( lal the CIRP and recovery efforts. Several One Tirr.r Settlemerlt (OTS) proposals were submitted by Petitioners but I one of them contained demonstrable proof of funding sourco [t iserlso asserted that resolution plans submitted by Pt:ti ioncrs u erc
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defective forwant of proof of firlancial capability. Petitioners are ineligible to submita Resolution Plan under Section29A(b) of the Insolvenc),and BankrupLclCode,2016, by reasonof their classificationas willful defaulters by three memberbanks of the consortium. TheBank points out that Scction24OA of the IBC grants cxemptions onlyinrespcctof clauses (c) and (h) of Section 29A,and that no exemptionis availablewhere the disqualificationarises by virtuc o[ clause (b). It is stated that this Writ Petitionis zr dcvice to circumvent the ineligibiliryand gain an advantagein the CIRP,rvhichcannot be perrnittcd 2.5. Respondent No. l alsostates that explanations offered by Petitioners,includingreliance on drought conditions and difhculties inoperations,Ltavc-'no bearing on the hndingsof ;illful default. Itis contended that declarationof willful default is based onPetitioners'conduct in relation to diversionand misuse offunds, and is not negatedby operationalor climatic difficulties.The Bank maintainsthat hndings of Identilrcation Committee andReview Committecare reasoned,based on materials availableon recordand passed in compliance with the RBI Master Circuiar.Writ Petitionis hopelesslybarred by delay and laches. Petitionerswere informedof the decision of the Review Committee throughletterdated25'03'2019 'Despite
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having knou,ledge of the classihcaLion as earlSr s in 2O 19. Pel itioners approached this Court only in 2O25r'"'it1 out olferrng anv satisfactorv explanation for the delay. Finalli Respondr:nt No. 1 asserts that the present Writ Petition ; frivolou s. vexatious and clearly intended to delay the CIRI' anci Lhwarl recovery efforts. It is also stated, Petitioners have l:r :n cngaging in piecemeal litigation with the object of thwarting .l e legitimate rights of lenders, hence, prays for dismissal of Writ I e litr o n.
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after a lapse of nearly six years from the date of communication and more than seven years lrom the date of the Committee proceedings.
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limited extent of ensuring compliance with mandatory regulatory requirements. Judicial review in thi context is supervisory in nature; it does not entail re-apprec: tion of facts, nor substitution of Court's vier,l,s for the commercia . or financial assessments of expert committees. Interferenct' s u,arranted only when there is a jurisdictional error, a substar tiaI violation of the procedure prescribed under the RBI Mastcr I irculars, or perversity in Lhe decision-making process.
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personal hearing dated 12.03.2018 and proceedings ofthe hcaring held on 26.O3.2O1a. The Bank has alsoplacedon record the orders of both the Committces dated 26.03.2018and 18.07.2018, vvhich record the basis for thehndingof wilful default. The Bank emphasizes that Petitionersdid not availthe statutorv remedy of review under the Master Circular,nor did they pursue the opportunit5r given b5' thisCourtin Writ Petition No. 6544 <tf 2O2l to appear before the Committeeafter receiving the forensic audit report. The Bank alsopoints out that Petitioners have already challengedthe declarationof willful dcfault in O.S. No. 82 of 2020, andpresent Writ Petition amounts to parallel proceedings.
9 On the merits of the challenge, thisCourt notes that Petitioners' explanationspredominantly relate to external or operational difficulties, includingdrought conditionsin 2Ol2- 2013, non release of sanctioned funds andPre-CDRPD amounts by consortium lenders, delay inCDR process, deterioration of stock and agricultural output,attachmentof operating accounts by the Income TaxDepartment,and difhculties in mobilizingworking capital.These explanations pertain to commerciai viability and operationalchallenges of the
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company. However, the willful dcfaulterframeu'r r < underthe Milster Circlrlar is concernedprimarilywith the cr'rduct of tht: borrorver, inctudingdiversion ol lttnds,non-roul.it'l I clf procec'ds, misutrlisation of credit facilities,zrndbreachof 1in rcing tcrms PctiLioners havc not demonstratedthat the Comnr1 eesfaile<lLo consider their explanations orconsidered irrek:ri ntmalerial The record does not indicatc thatthe Comrnittecs. rted without jurisdiction or proceeded on assumptions tll)ri rpportedb1' evidence.
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1 l. As to delay, Petitioners rely on thependency ol Writ Petition No- 6544 of 2O2l and olherproceedingsto justily the Iate ctralienge. Horvever, the record indicates thatthe said Writ Petition n as disposed of on 16.04.202 t with limiteddirections, and nothing prevented Petitioners fromchallenging the underlving classihcation thereafter. Theplea of continuing cause ol action does not applyrvhere the underlyingdecision attained linality vears earlier and its consequenceswere known to Pctitioners. The lapse of nearly sixyears without a reasonable explarratron is significant and cannot be ignoredinu'rit jurisdiction.
i3. For the reasons stated hereinabove and upona comprehensive evaluation of the material on record andthe submissions advanced, this Court is of the consideredview that no case has been made out for interference with the orders
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passed by the Willful Defaulter Identification I f mmlttec on 26.03.2018 and the Willful Dclaulter Revieu, .. lmmittcc on 18.O7.2O18. Pctitioners havr: not dcmor., trated zrny jurisdictional infrrmiq', substantial procedural ir egularity, or , perversity \,arrant ing exercise of judicial rt.r i t,. The Writ Petition is also barred by gross delay and laches lor which no satisfactory explan:rtion has bcen lurnished.
i 5. Consequently, thc rniscellaneous l:triications, if any shall stand closed.
//TRUE COPY//
S (.BHAVANI SWAMY I;TANT REGISTRAR SECTION OFFICER
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To
1 One CC toSMT.KANUMURI KALYANI, Advocate [OP[J )l 2 One CC to SRIAJGAL RAVI BABU, S.C FORSBI [OPtCl Two CD CoPies
MP N/ BS
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HIGH COURT
DA-r ID:01 11212025
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( ,l ,R lHE Siq ,€
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ORDER
WP.No.11743 of 2025
DISMISSING THE W'IIIT PETITION WITIIOUT COSTS
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2 issues framed by the court
Whether the willful default classification orders of the Identification and Review Committees were vitiated by procedural violation or jurisdictional error.
Whether the writ petition challenging the 2018 classification filed in 2025 was barred by delay and laches.
Colour shows how this judgement treated each authority
Scardar Associates v. Punjab & Sind BankRelied on¶6
Scardar Associates v. Punjab & Sind Bank
1 provisions across 1 enactments
Vidyasagar Parchuri
Parchuri Chandravathi
State Bank of India
M/s Vibha Agrotech Ltd.
The Reserve Bank of India
Nagesh Bheemapaka
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
