The petitioner, a non-executive woman director of PSL Limited, was aggrieved by the letter dated 16 July 2018, which declared her a "willful defaulter." The petition arose from a situation where the company, PSL Limited, had been issued a show-cause notice in November 2016, but no separate notice was issued to the petitioner personally. This omission became a key issue in the case, as the petitioner argued that she was not afforded the necessary procedural fairness required under the law.

The Master Circular dated 1 July 2015 governs the process for declaring a company and its directors as willful defaulters. Clause 3(b) of the circular mandates that a show-cause notice should be issued to the concerned borrower and relevant directors (including whole-time directors and promoters) to allow them to present their submissions before a final decision is made.

Clause 3(d) of the circular provides specific safeguards for non-whole-time directors. According to this provision, non-promoter, non-whole-time directors can only be considered willful defaulters in exceptional cases where it is established that the director was aware of the default or consented to it. These protections aim to ensure that a non-whole-time director is not unjustly held liable for the actions of the company.

The petitioner argued that she had not received a notice as required under the circular, and therefore, the declaration of her as a willful defaulter was a violation of her right to a fair hearing. The petitioner’s counsel also pointed out that, based on the Master Circular, non-executive women directors should not be classified as willful defaulters unless it is conclusively established that they were involved in or aware of the default.

Additionally, it was highlighted that the communication from the Managing Director of PSL Limited to the Committee of Executives on 17 February 2017 specifically mentioned that non-executive women directors like the petitioner could not be deemed willful defaulters. Despite this, the impugned letter was issued without addressing these points or considering the petitioner’s specific role and responsibilities within the company.

The court examined the procedural aspects of the case and found that the Respondent had failed to issue a show-cause notice to the petitioner before declaring her a willful defaulter. This omission was seen as a significant breach of the principles of natural justice. The court emphasized that the Master Circular required that non-whole-time directors, like the petitioner, should be given an opportunity to respond to allegations before being classified as willful defaulters.

In line with previous rulings, including the judgment in State Bank of India vs. Jah Developers Private Limited & Ors. (2019 6 SCC 787), the court highlighted the severe consequences of being declared a willful defaulter, which can significantly impact a person's ability to conduct business, access financial facilities, and hold managerial positions. Therefore, it was crucial that the procedures outlined in the Master Circular be followed meticulously to ensure fairness.

The court quashed the impugned letter dated 16 July 2018 insofar as it concerned the petitioner, concluding that the declaration was issued in violation of the petitioner’s right to a fair hearing. However, the court allowed Respondent No.1 the liberty to issue a fresh show-cause notice if deemed necessary and proceed according to the law. Moreover, the Respondents were restrained from taking any action based on the impugned letter.

The case highlights the importance of procedural fairness in decisions that have significant consequences for individuals. It reinforces the principle that no person should be declared a willful defaulter without being given an adequate opportunity to defend themselves.

This case serves as a reminder of the critical role that natural justice and proper procedural safeguards play in legal proceedings, particularly when the reputation and business operations of individuals are at stake. The ruling underscores the necessity for authorities to follow established legal procedures to ensure that justice is not only done but seen to be done.