- 1 - HC-KAR NC: 2026:KHC:14879 WP No. 2615 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 12TH DAY OF MARCH, 2026 BEFORE THE HON'BLE SMT. JUSTICE LALITHA KANNEGANTI WRIT PETITION NO.2615 OF 2024 (GM-DRT) BETWEEN: 1. SHRI. K. DINAKAR RAO AGED ABOUT 73 YEARS S/O LATE K. SUBBA RAO PROPRIETOR OF MANGALA GAS DISTRIBUTORS KUDUMBI GARDEN, NEAR DON BOSCO HALL MANGALURU-575 001. …PETITIONER (BY SRI. GIRIDHAR H., ADVOCATE) AND: 1. PUNJAB NATIONAL BANK NO.1, GROUND FLOOR TRADE CENTRE CANDLE GARDEN BUNTS HOSTEL ROAD MANGALURU-575003 REPRESENTED BY ITS CHIEF MANAGER. 2. AUTHORIZED OFFICER/THE MANAGER PUNJAB NATIONAL BANK CIRCLE SASTRA, HUBLI RS NO.98/4, CENTRUM BUILDING 3RD FLOOR, GOKUL ROAD HUBBALLI-580030. …RESPONDENTS (BY SRI. R.NARAYANAPPA, ADVOCATE FOR C/R2) Digitally signed by SUVARNA T Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2026:KHC:14879 WP No. 2615 of 2024 THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF INDIA PRAYING TO DIRECT THE R1 TO DECLASSIFY ACCOUNT OF THE PETITIONER AS PERFORMING ASSET BASED ON THE RECORD OF RECOVERY IN THE ACCOUNT OF THE PETITIONER AS PROVIDED UNDER ANNEXURE AF MASTER CIRCULAR OF RESERVE BANK OF INDIA ON INCOME RECOGNITION, ASSET CLASSIFICATION, PROVISIONING AND OTHER RELATED MATTERS. DIRECT THE R1 TO REMOVE THE PETITIONER FROM THE LIST OF WILFUL DEFAULTER IN TERMS OF ANNEXURE N1 MASTER CIRCULAR ISSUED BY RESERVE BANK OF INDIA ON WILFUL DEFAULTERS AND TO DIRECT THE R1 TO RECEIVE FROM THE PETITIONER SUM OF RS. 36,47,418.58 PS WITH INTEREST CALCULATED UPTO 31/03/2023 TOWARDS SETTLEMENT OF THE ACCOUNT OF THE PETITIONER IN TERMS OF ANNEXURE BX LETTER OF ACCEPTANCE AND NOT TO PROCEED WITH THE FURTHER RECOVERY STEPS AND TO QUASH THE ANNEXURE CG SALE NOTICE DATED 21/12/2023 ISSUED BY THE R2 AUTHORIZED OFFICER OF THE R1. THIS PETITION COMING ON FOR ORDERS THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE SMT. JUSTICE LALITHA KANNEGANTI - 3 - HC-KAR NC: 2026:KHC:14879 WP No. 2615 of 2024 ORAL ORDER The present writ petition is filed seeking the following prayer: “ WHEREFORE, the Petitioner respectfully prays that this Hon’ble Court maybe please to issue; a) Writ of mandamus directing the Respondent No.1 to declassify account of the Petitioner as Performing Asset based on the record of recovery in the account of the Petitioner as provided under Annexure AF Master Circular of Reserve Bank of India on Income Recognition, Asset Classification, Provisioning & Other Related Matter; b) Writ of mandamus directing the Respondent No.1 to remove the petitioner from the List of Wilful Defaulter in terms of Annexure N1 Master Circular issued by Reserve Bank of India on Wilful Defaulters. c) Writ of Mandamus directing the Respondent No.1 to receive from the Petitioner sum of Rs.36,47,418.58 ps with interest calculated upto 31.03.2023 towards settlement of the account of the Petitioner in terms of Annexure BX Letter of Acceptance and not to proceed with the further recovery steps; d) Writ of certiorari quashing the Annexure CG Sale Notice dated 21.12.2023 issued by the Respondent No.2, authorized officer of the Respondent No.1. (Amendment carried out as per order dated 01.02.2025) - 4 - HC-KAR NC: 2026:KHC:14879 WP No. 2615 of 2024 e) and to grant such other order or relief to which the Petitioner may be found entitled to under the circumstances of the case in the interest of justice. ” 2. It is the case of the petitioner that the account of the petitioner is declared as NPA and the Bank has initiated the proceedings against the borrower contrary to the guidelines issued by the Reserve Bank of India. 3. The next submission is with regard to declaring the petitioner as Wilful Defaulter, even in that regard also the respondents have failed to follow the circular issued by the Reserve Bank of India. These are the prayers that were sought before this Court. 4. The first prayer with regard to declassifying the account of the petitioner as performing asset is concerned, if the petitioner has any grievance, he can approach the DRT as per the judgment of the Hon'ble Apex Court in case of K.Virupaksha and another V/s State of Karnataka arising out of SLP(Crl.) No.5701/2019, the Tribunal will consider this aspect. Hence, this Court is not inclined to consider the first prayer. - 5 - HC-KAR NC: 2026:KHC:14879 WP No. 2615 of 2024 5. Then coming to the second prayer, the petitioner is declared as a Willful Defaulter and communication was sent by the respondent/Bank dated 24.09.2015 is concerned, learned counsel for the petitioner submits that the Reserve Bank of India has issued the master circular on Wilful Defaulter in July- 2015 as per Clause 3 of the said circular which deals with the mechanism for identification of Wilful Defaulter, as per Clause 3A, the evidence of the Wilful defaulter on the part of the borrowing company and its promoter/whole-time director at the relevant time should be examined by a Committee headed by an Executive Director or equivalent and consisting of two other senior officers of the rank of GM/DGM. If stipulates that if the Committee concludes that an event of wilful default has occurred, it shall issue a Show Cause Notice to the concerned borrower and the promoter / whole - time director and call for their submissions and after considering their submissions issue an order recording the fact of wilful default and the reasons for the same. An opportunity should be given to the borrower and the promoter / whole - time director for a personal hearing if the Committee feels such an opportunity is necessary. Learned counsel for the petitioner submits that no show cause notice - 6 - HC-KAR NC: 2026:KHC:14879 WP No. 2615 of 2024 was issued to the petitioner and no Committee is constituted and without following any of the procedure contemplated, the petitioner is declared as a wilful defaulter. 6. Learned counsel appearing for the respondents have already filed their objections, but their objections are silent with regard to issuance of notice and constitution of the Committee. In these circumstances, the respondents contrary to their own guidelines, cannot declare the petitioner as a wilful defaulter and the same is to be set aside. 7. Then coming to the third relief sought by the petitioner that is directing a mandamus to the respondent No.1 to receive from the petitioner a sum with interest calculated upto 31.03.2023 towards the settlement of the account of the petitioner and this Court cannot issue such a direction to the respondents in respect of the petitioner is concerned. In that view of the matter, this Court is passing the following: ORDER i) Accordingly, the Writ Petition is partly allowed and the proceedings dated - 7 - HC-KAR NC: 2026:KHC:14879 WP No. 2615 of 2024 24.09.2015 are set-aside. The respondents are at liberty to proceed in accordance with the law. ii) The petitioner is at liberty to approach the DRT with regard to the other relief. iii) The petitioner shall have the benefit of Section 14 of the Limitation Act. iv) As this Court has granted liberty to the petitioner to approach DRT and as the said petition is pending before this Court from 2024, the respondents shall not take any coercive steps for a period of four weeks. v) All I.As. in this petition shall stand closed. Sd/- (LALITHA KANNEGANTI) JUDGE RHS List No.: 1 Sl No.: 12