The High Court on 2nd April 2025 ruled that the classification of a wilful defaulter must adhere to the principles of natural justice and struck down the arbitrary declaration based on a discredited audit report.
The Bombay High Court Division Bench, comprising Justice Revati Mohite Dere and Justice (Dr.) Neela Gokhale reviewed a writ petition and held that the classification of an individual as a ‘wilful defaulter’ must strictly adhere to the principles of natural justice, including access to relevant documents and a fair hearing, given the severe financial and reputational consequences of such classification. The Court further ruled that reliance on a discredited Transaction Audit Report (TAR) without affording the petitioner a meaningful opportunity to defend himself rendered the entire process arbitrary and legally unsustainable.