# In the matter of V Selvaraj Vs. Reserve Bank of India and Ors. W.P.No.43433 of 2016 & W.M.P.No.37294 of 2016

> HC judgment dated 2020-08-29. Citation: TCN-2020-HC-00017. The writ petition was filed under Article 226 of the Constitution of India, seeking a Writ of…

- **Court:** HC
- **Order date:** 29 Aug 2020
- **Citation:** TCN-2020-HC-00017
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/high-courts-chandigarh-bench/v-selvaraj-vs-reserve-bank-of-india-and-ors-wpno43433-of-2016-wmpno37294-of-2016-71dc8a95

## Summary

### Background

The writ petition was filed under Article 226 of the Constitution of India, seeking a Writ of Certiorarified Mandamus to call for records relating to a letter from the third respondent (State Bank of India) and quash it, directing the respondents to declassify the petitioner (V.Selvaraj) from the list of Wilful Defaulters. The petitioner, a retired IAS officer, had joined the fourth respondent-Company (First Leasing Company of India Ltd. (FLCI)) as a Non-Executive Independent Director. The Reserve Bank of India (RBI) conducted an annual inspection in 2013 and found accounting malpractices in FLCI. Subsequently, the petitioner was classified as a wilful defaulter, which he contested, arguing he was not involved in the day-to-day affairs of the company and that the

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## Facts

V.Selvaraj, a retired IAS officer, joined First Leasing Company of India Ltd. (FLCI) as a Non-Executive Independent Director on 14.08.2012. FLCI, a Public Limited Company incorporated on 10.09.1973, was engaged in leasing, hire purchase, and financing. Farouk Irani, the Founder Member and Managing Director, had absolute control over the company's affairs. The Reserve Bank of India (RBI) conducted an annual inspection in 2013 and found accounting malpractices. A Forensic Audit was conducted by Dr.R.K.Raghavan, who identified the Managing Director for the misdeeds. The State Bank of Mysore, a creditor of FLCI, declared the company's assets as non-performing on 31.12.2013. The petitioner attended 4 Board meetings. The third respondent sent a letter to include the name of

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## Issues and analysis

### Issue 1: Whether the petitioner, as a Non-Executive Independent Director, can be classified as a wilful …

**Ratio:** Section 149(12) of the Companies Act, 2013, states that an Independent Director shall be

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**Reasoning:** The court reasoned that there was no evidence to show that the petitioner actively

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**Interpretation:** This section clarifies that independent directors are not automatically liable

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**Application:** The court applied this principle to the facts, noting that the petitioner was a

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## Parties

- **Judges:** K.KALYANASU…
- **Appellants:** V.Selv…
- **Respondents:** M/s.First Leasing…; The Reserve Bank…
- **Advocates:** G.Masil…; Mani Sundar…; +2 more

## Timeline

- **1973-09-10 — Incorporation…**: First Leasing Company of India Ltd. (FLCI) was…
- **2012-08-14 — Petitioner Jo…**: V.Selvaraj joined FLCI as a…

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