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Borrower Has No Right To Be Represented By Lawyer Before In-House Committee Probing 'Wilful Default'

In CIVIL APPEAL NO. 4776 OF 2019, STATE BANK OF INDIA vs M/S. JAH DEVELOPERS PVT. LTD. & ORS., the question that arose was whether, when a person is declared to be a wilful defaulter under the Circulars of the RBI, such person is entitled to be represented by a lawyer of its choice before such declaration is made.

As per the Amicus Curiae. Section 30 of 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 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. Therefore he argued that lawyers should be allowed to represent in these matters.

The applicants however argued that in-house committees referred to in the RBI Circulars cannot be said to be “tribunals” inasmuch as there is no investment of any judicial power by the State in these in-house committees.

The Supreme Court observed that the judgment of the Delhi High Court from which this appeal has originated 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-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.

The Supreme Court decided 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. The Supreme Court referring to the judgments in Associated Cement Companies Ltd. v. P. N. Sharma and Anr. and Jaswant Sugar Mills Ltd., Meerut v. Lakshmi Chand and Ors., applying the tests laid down in the said judgments, 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 and therefore no lawyer has any right under Section 30 of the Advocates Act to appear before the in-house committees so mentioned.

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