$~19 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 11711/2025 M/S DYS ROYALS PVT. LTD. .....Petitioner Through: Mr. Amit Chadha, Sr. Adv. with Mr. Hirein Sharma, Mr. G.S. Arora, Mr. Saurabh Goel, Mr. Harjas Singh, Mr. Dhruv Tomar and Mr. Kartik Shoukeen, Advs. versus RESERVE BANK OF INDIA & ORS. .....Respondents Through: Mr. Manu Beri, Mr. Prateek Kasliwal and Mr. Kudrat Mann, Advs. for R-2. Mr. Saurabh Kirpal, Sr. Adv. with Mr. Aditya Bhattacharya and Mr. Rajat Choudhary, Advs. for R-3. CORAM: HON'BLE MR. JUSTICE VIKAS MAHAJAN O R D E R % 26.08.2025 CM APPL. 52176/2025 (filed by petitioner seeking early hearing) 1. The present application has been filed seeking early hearing. 2. For the reasons mentioned in the application, the same is allowed. 3. The application is disposed of. W.P.(C) 11711/2025 4. With the consent of the parties the matter is taken up for consideration. 5. The present petition has been filed seeking direction to the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 03/09/2025 at 12:13:58 respondents directing the removal of the wilful defaulter declaration from the credit rating of petitioner company as issued by the respondent no.2/company. 6. The case set out in the present petition is that the petitioner company and respondent no.3 company entered into informal relationship of mutual financial assistance with each other, with petitioner company emerging as creditor of respondent no.3 company in the year 2022-23. Subsequently, in the year 2023-24 petitioner was re-paid debt owed by the respondent no.3 company. 7. Thereafter, respondent no.3 company had advanced financial assistance to the petitioner company to the extent of Rs.23 Lakhs in the year 2024-25. However, the petitioner company was shocked to receive the credit report issued by the respondent no.2/Transunion CIBIL wherein petitioner company has been declared as ‘wilful defaulter’. 8. Mr. Amit Chadha, learned senior counsel appearing on behalf of petitioner invites attention of the Court to the petitioner company’s profile as available on the website of the respondent no.2/CIBIL wherein the petitioner has been reflected as ‘wilful defaulter’. 9. Mr. Chadha submits that petitioner through its advocate had issued a legal notice dated 10.07.2025 to the respondent no.3/company to have the records of CIBIL rectified and have the name of the petitioner deleted as wilful defaulter. However, no response to the legal notice was received. 10. He submits that in this backdrop the petitioner was constrained to file the present petition. 11. Mr. Chadha contends that insofar as declaration of wilful defaulter is concerned, the same has been done by the respondent no.3, which is an This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 03/09/2025 at 12:13:58 NBFC, without following the procedure as stipulated in the Master Circular of the Reserve Bank of India, inasmuch as neither a show cause notice was given to the petitioner nor any personal hearing was afforded. He, therefore, urges that the order of ‘wilful defaulter’ needs to be set aside. 12. Mr. Saurabh Kirpal, learned senior counsel appearing on behalf of respondent no.3/company, on instructions, submits that the respondent no.3/company maintains that show cause notice was given to the petitioner. However, on being queried by the Court as to whether there is any record of such show cause notice having been served upon the petitioner, he fairly concedes that the notice was served by hand, however, there is no postal receipt or any acknowledgment to establish that the same was served upon the petitioner. 13. He further fairly states that no personal hearing was afforded to the petitioner in the present case. 14. Needless to say that the order of declaration of will defaulter entails adverse civil consequences. 15. At this stage, it is apposite to refer to the following relevant excerpts from the Master Direction on Treatment of Wilful Defaulters and Large Defaulters dated 30.07.2024 of the Reserve Bank of India, which provides giving of show cause notice, as well as, grant of personal hearing : “CHAPTER II Treatment of Wilful Defaulters 4. General requirements xxx xxx xxx (a) (i) The evidence of wilful default shall be examined by an Identification Committee. (ii) If the Identification Committee is satisfied that an event of wilful default has occurred, it shall issue a show-cause notice to This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 03/09/2025 at 12:13:58 borrower/ guarantor/ promoter/ director/ persons who are in charge and responsible for the management of the affairs of the entity, and call for the submissions from them within 21 days of issuance of show cause notice. Lenders shall disclose to them all materials and information on which show cause notice is based. xxx xxx xxx (vii) The Review Committee shall provide an opportunity for a personal hearing also to the borrower/ guarantor/ promoter/ director/ persons who are in charge and responsible for the management of the affairs of the entity. However, if the opportunity is not availed or if the personal hearing is not attended by the borrower/ guarantor/ promoter/ director/ persons who are in charge and responsible for the management of the affairs of the entity, the Review Committee shall, after assessing the facts or material on record, including written representation, if any, consider the proposal of the Identification Committee and take a decision.” (emphasis supplied) 16. Reference may also be had to decision of the Hon’ble Supreme Court in State Bank of India vs. Jah Developers Private Limited & Ors., (2019) 6 SCC 787. The said decision, though rendered in the context of the preceding Master Circular of 2015 wherein no explicit provision for personal hearing was present, unlike the above quoted Revised Circular of 2024, the Hon’ble Supreme Court made the following observation regarding the need for issuance of a show cause notice and taking into account the representation by the borrower before declaration as wilful defaulter, noting the drastic consequences that follow after such declaration of wilful default. The relevant part of the decision reads as under: “24. …Whether a default is intentional, deliberate, and calculated is again a question of fact which the lender may put to the borrower in a show-cause notice to elicit the borrower's submissions on the same. However, we are of the view that Article 19(1)(g) is attracted in the facts of the present case as the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 03/09/2025 at 12:13:58 moment a person is declared to be a wilful defaulter, the impact on its fundamental right to carry on business is direct and immediate. This is for the reason that no additional facilities can be granted by any bank/financial institutions, and entrepreneurs/promoters would be barred from institutional finance for five years. Banks/financial institutions can even change the management of the wilful defaulter, and a promoter/director of a wilful defaulter cannot be made promoter or director of any other borrower company. Equally, under Section 29-A of the Insolvency and Bankruptcy Code, 2016, a wilful defaulter cannot even apply to be a resolution applicant. ...” (emphasis supplied) 17. Having regard to the submissions made by the learned counsel, as well as, the exposition of law noted hereinabove, this Court is of the considered opinion that the order of wilful defaulter deserves to be set aside. 18. Accordingly, the order of wilful defaulter as reflected in the report of the CIBIL is quashed and set aside. Consequently, the respondent no.2/Transunion CIBIL is directed to rectify the credit score of the petitioner within a period of two weeks from today. 19. It is clarified that respondent no.3 shall be at liberty to initiate fresh proceedings against the petitioner in accordance with law keeping in view the aforesaid observations. 20. The petition, along with pending application(s), stands disposed of in the above terms. VIKAS MAHAJAN, J AUGUST 26, 2025 N.S.ASWAL This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 03/09/2025 at 12:13:58