Calcutta High Court
Tarun Chaturvedi & Ors vs Reserve Bank Of India And on 2 January, 2025
Author: Amrita Sinha
Bench: Amrita Sinha
OD-5
WPO/1173/2024
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
ORIGINAL SIDE
TARUN CHATURVEDI & ORS.
-Versus-
RESERVE BANK OF INDIA AND
ANR.
BEFORE
The Hon'ble Justice AMRITA SINHA
Date: 2nd January, 2025
APPEARANCE:
Mr. Swatarup Banerjee, Adv.
Mr. Nirmalya Dasgupta, Adv.
Mr. Sariful Haque, Adv.
Mr. Rajib Mullick, Adv.
Ms. S. Jha, Adv.
...for the petitioner.
Ms. Suchismita Chatterjee Ghosh, Adv.
Mr. Malay Kumar Seal, Adv.
...for the respondent no.1.
Mr. Ajay Gaggar, Adv.
Mr. Mttiyo Mallick, Adv.
Mr. Sayan Banerjee, Adv.
..for the respondent no.2.
1. The petitioner no.1 is the Managing Director of the petitioner no.2. His
name has been reflected in the Central Fraud Registry (CFR) reported by
the State Bank of India in January, 2021 and in December, 2022. In view
of such mentioning of the name of the petitioner no.1 in the CFR, the
petitioners are not in a position to generate funds for making payment in
terms of the Binding Resolution Plan approved by the National Company
Law Tribunal (NCLT).
2. In the instant writ petition the petitioners allege that no prior opportunity
to show cause was given to the petitioner no.1 prior to incorporating his
name in the CFR; that the proceeding against the petitioner no.1 could not
have been initiated at all as he was not holding the position of the
Managing Director on the day when such reporting was made; and, thirdly
that the proceedings under the Insolvency and Bankruptcy Code, 2016
could not have continued any further after the Binding Resolution Plan
was approved by the Tribunal.
3. I have heard the submission made on behalf of the Reserve Bank of India
and State Bank of India. It has been fairly admitted that the show cause
notice which was to be issued in terms of the Master Directions on Fraud
Risk Management in Commercial Banks (including Regional Rural Banks)
and All India Financial Institutions published by the Reserve Bank of
India on 15th July, 2024 has not been complied with.
4. The Master Directions clearly mention about issuance of a detailed show
cause notice to the persons, entities and its Promoters/Whole-Time and
Executive Directors against whom allegation of fraud is being examined.
A reasonable time of not less than twenty one days is to be provided to the
said person on whom the show cause notice is to be served to respond to
the same. The aforesaid provision was incorporated by the Reserve Bank
of India in its Master
Directions in compliance of the direction passed by the Hon'ble Supreme
Court in Civil Appeal No.7300 of 2022, in the matter of State Bank of India
& Ors. Vs. Rajesh Agarwal & Ors.
5. Learned counsel for the State Bank of India points out that the show cause
notice has not been issued because a review petition is pending
consideration before the Supreme Court of India.
6. The fact of pendency of a review petition will certainly not permit the bank
to act contrary to a mandatory direction passed by the Hon'ble Supreme
Court. Till the prayer made in the review petition is allowed, the
judgment of the Supreme Court remains binding and the parties are duty
bound to act in accordance with the same.
7. Without entering into the other points that have been raised by the
petitioners in the instant writ petition, as it appears that the bank has
acted contrary to the Master Directions issued by the Reserve Bank of
India, the instant writ petition is disposed of by directing the State Bank
of India to take steps strictly in terms of the Master Directions published
by the Reserve Bank of India and provide an opportunity of hearing to the
petitioners to defend their case. The bank shall act strictly in terms of the
direction passed by the Supreme Court followed by the Master Directions
of the Reserve Bank of India.
8. Till such time a decision is taken by the bank, the reporting of CFR
against the petitioner no.1 shall not be given any further effect to.
9. WPO/1173/2024 stands disposed of.
10. Urgent photostat certified copy of this order, if applied for, be supplied to
the parties upon compliance of all legal formalities.
(AMRITA SINHA, J.)
A/s.
