Punjab-Haryana High Court
Prabhat Kumar Shrivastava vs Idbi Bank And Ors on 3 July, 2024
Author: Anupinder Singh Grewal
Bench: Anupinder Singh Grewal
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH 286 CWP-23732-2023 DATE OF DECISION: 03.07.2024 PRABHAT KUMAR SHRIVASTAVA ... Petitioner (s) Versus IDBI BANK AND ORS ... Respondent(s) CORAM: HON'BLE MR. JUSTICE ANUPINDER SINGH GREWAL HON'BLE MS. JUSTICE LAPITA BANERJI Present: Mr. Akshay Bhan, Senior Advocate with Mr. Animesh Sharma, Advocate for the petitioner(s). Mr. Tejender Joshi, Advocate and Mr. Ram Pal Kohli, Advocate for respondent No.1. Mr. Gaurav Goel, Advocate for respondents No.2 and 3. ok of 2s 2 ANUPINDER SINGH GREWAL, J. (ORAL)
The petitioner has challenged the Fraud Monitoring Return dated 13.04.2022 (Annexure P-6) whereby the petitioner has been declared as a fraud.
2. Learned senior counsel for the petitioner submits that the declaration reporting the petitioner as a fraud has been made without affording an opportunity of hearing. He has relied upon the judgment of the Supreme Court in the case of State Bank of India and others Vs. Rajesh Agarwal and others, (2023) 6 SCC 1.
3. Heard.
4. It is manifest that the reporting of the petitioner as a fraud in the Fraud Monitoring Return has been made without any notice or affording opportunity of hearing to the petitioner. The petitioner has been visited with adverse civil consequences without following the principles of natural justice. The Supreme SWARN JIT SINGH 2024.07.04 16:53 I attest to the accuracy and integrity of this document Chandigarh CWP-23732-2023 -2- Court in the case of State Bank of India and others Vs. Rajesh Agarwal and others (supra), had held that the principles of natural justice would be read in Clauses 8.9.4 and 8.9.5 of the Master Directions on Fraud and therefore, such adverse action cannot be taken without affording an opportunity of hearing. The relevant extract of the judgment is reproduced hereunder:-
"XXxx
85. In light of the legal position noted above, we hold that the rule of audi alteram partem ought to be read in Clauses 8.9.4 and 8.9.5 of the Master Directions on Fraud. Consistent with the principles of natural justice, the lender banks should provide an opportunity to a borrower by furnishing a copy of the audit reports and allow the borrower a reasonable opportunity to submit a representation before classifying the account as fraud. A reasoned order has to be issued on the objections addressed by the borrower. On perusal of the facts, it is indubitable that the lender banks did not provide an opportunity of hearing to the borrowers before classifying their accounts as fraud. Therefore, the impugned decision to classify the borrower account as fraud is vitiated by the failure to observe the rule of audi alteram partem. In the present batch of appeals, this Court passed an ad-interim order restraining the lender banks from taking any reasoning, we hold that the decision by the lender banks to classify the borrower accounts as fraud, is violative of the principles of natural justice. The banks would be at liberty to take fresh steps in accordance with this decision.
86. XXxxxx E. Conclusion
87. The conclusions are summarized below:SWARN JIT SINGH 2024.07.04 16:53 I attest to the accuracy and integrity of this document Chandigarh
CWP-23732-2023 SWARN JIT SINGH 2024.07.04 16:53 I attest to the accuracy and integrity of this document Chandigarh -3-
1. No opportunity of being heard is required before an FIR is lodged and registered;
ii. Classification of an account as fraud not only results in reporting the crime to investigating agencies, but also has other penal and civil consequences against the borrowers; iii. Debarring the borrowers from accessing institutional finance under Clause 8.12.1 of the Master Directions on Frauds results in serious civil consequences for the borrower;
iv. Such a debarment under Clause 8.12.1 of the Master Directions on Frauds is akin to blacklisting the borrowers for being untrustworthy and unworthy of credit by banks. This Court has consistently held that an opportunity of hearing ought to be provided before a person is blacklisted; v. The application of audi alteram partem cannot be impliedly excluded under the Master Directions on Frauds. In view of the time frame contemplated under the Master Directions on Frauds as well as the nature of the procedure adopted, it is reasonably practicable for the lender banks to provide an opportunity of a hearing to the borrowers before classifying their account as fraud;
vi. The principles of natural justice demand that the borrowers must be served a notice, given an opportunity to explain the conclusions of the forensic audit report, and be allowed to represent by the banks/JLF before their account is classified as fraud under the Master Directions on Frauds. In addition, the decision classifying the borrower's account as fraudulent must be made by a reasoned order; and vii. Since the Master Directions on Frauds do not expressly provide an opportunity of hearing to the borrowers before classifying their account as fraud, audi alteram partem has to be read into the provisions of the CWP-23732-2023 -4- directions to save them from the vice of arbitrariness."
5. Consequently, the Fraud Monitoring Report dated 13.04.2002 (Annexure P-6) is set aside. However, the respondents shall be at liberty to proceed afresh after affording an opportunity of hearing to the petitioner.
(ANUPINDER SINGH GREWAL) JUDGE (LAPITA BANERJI) JUDGE 03.07.2024 SwarnjitS Whether speaking/reasoned : Yes/No Whether reportable : Yes/No SWARN JIT SINGH 2024.07.04 16:53 I attest to the accuracy and integrity of this document Chandigarh