Delhi High Court
Akash Gupta vs Punjab National Bank on 3 March, 2025
$~39 & 47
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 3rd March, 2025
+ W.P.(C) 12981/2024
PAWAN KUMAR GARG & ANR. .....Petitioners
Through: Mr. Manohar Malik, Advocate.
versus
PUNJAB NATIONAL BANK .....Respondent
Through: Dr. SS Hooda and Mr. Aditya Hooda,
Advocates.
+ W.P.(C) 12719/2024 & CM APPL. 53029/2024, CM APPL.801/2025
AKASH GUPTA .....Petitioners
Through: Mr. Janender Kumar Chumbak,
Advocate (through V.C.)
versus
PUNJAB NATIONAL BANK .....Respondent
Through: Dr. SS Hooda and Mr. Aditya Hooda,
Advocates.
CORAM:
HON'BLE MR. JUSTICE MANOJ JAIN
J U D G M E N T (oral)
W.P.(C) 12981/2024 & CM APPL. 12622/2025 (early hearing) & W.P.(C)
1. Learned counsel for the parties appear in both the abovesaid matters,
and with the consent of learned counsel for the petitioners and learned counsel
for respondent Bank, both the abovesaid matters, which were, otherwise,
fixed up for hearing on 03.04.2025, have been taken up today itself.
2. Accordingly, the date of 03.04.2025 stands cancelled.
Digitally Signed W.P.(C) 12719/2024
3. W.P.(C) 12981/2024 has been filed by Sh. Pawan Kumar Garg and
Sh. Narendra Garg, who were Directors/Guarantors of M/s Apple Industries
Limited.
4. As far as W.P.(C) 12719/2024 is concerned, the abovesaid writ petition
has been filed by Mr. Akash Gupta, R/o B-1302, Mantri Elegance, NS Palya,
Bannerghatta Road, Bangalore-560076. However, when the Show Cause
Notice was issued by Punjab National Bank on 18.11.2023, his name has been
reflected as 'Akash Garg' instead of 'Akash Gupta'.
5. Learned counsel for petitioners submits that there is some confusion
with respect to his surname and submits that it was Mr. Akash Gupta, who
was a non-shareholding Director in Apple Industries Limited and was also a
guarantor with respect to the loan in question.
6. According to petitioners, some action has been taken by respondent
Bank and their account(s) have been declared/classified as 'fraud'. They also
claim that such action is arbitrary and unconstitutional as, at no earlier point
of time, any Show Cause Notice was issued to them.
7. Such contention has been refuted by respondent Bank.
8. Learned counsel for respondent Bank submits that the show cause
notices were issued to all of them and since they did not respond to the
abovesaid Show Cause Notice, the accounts were classified as 'fraud'.
9. This Court is of the considered opinion that without going into the fact
whether Show Cause Notice was actually sent or not, both the abovesaid writ
petitions can be disposed of on a very short point.
10. The classification as fraud has been done by virtue of order dated
30.03.2024 and such order reads as under:-
"Madam /Sir,
Digitally Signed W.P.(C) 12719/2024
In this regard, it- is informed that as no reply was received from you within
prescribed timelines at ours in response to the subject 'Show Cause
Notice‟, based on the findings of investigation (as applicable) conducted
by our Bank and shared with you vide our above cited Show Cause Notice,
we have perceived your account/s as fraud.
Accordingly, Bank has decided to classify your loan account as „Fraud‟
for the following reasons:
i) Misappropriation and Criminal Breach of Trust
The Bank shall be taking further course of action to report the account/
your name to the Reserve Bank of India (RBI) as per the directions
contained in the RBI Master Directions / Circulars issued time to time, in
this regard.
Yours faithfully,
Punjab National Bank
Branch/Office: Zonal Sastra Centre
Address: First Floor, 7, Bhikaji Cama Place,
New Delhi - 110066
Email:[email protected]
Contact No.011-447229459"
11. Evidently, the Bank has classified the loan account as 'fraud‟ merely
on the premise that no reply had been received.
12. While dealing with one another writ petition W.P.(C) 5413/2024 of
group concern i.e. Apple Commodities Limited vs. PNB, in a similar
circumstance, such order of classification of the loan account as fraud was set
aside while observing that reasons have to be specified by the Bank and the
account could not have been classified as fraud merely for the reason that the
Show Cause Notice had not been responded to.
13. Para 3 to 10 of said order dated 20.01.2025 reads as under:-
"3. Quite obviously, the bank does not seem to have given any
"independent and specific reason" as to why it has taken the
above said decision to classify the loan account as „fraud‟. Of
course, findings of the investigation conducted by the bank were
Digitally Signed W.P.(C) 12719/2024
made part of the Show Cause Notice and the bank while declaring
the account as „fraud‟, most probably, would have swayed away
by the same, fact remains that the order in question does not make
it amply specific and clear.
4. The order has to be a reasoned and categoric one.
5. Reasons need to be specified and not to be inferred.
6. Whenever any decision is made by any administrative body or
financial institution, it is imperative that such decision contains
the reasoning. Such requirement is not a mere procedural
formality; it rather stems from the fundamental need to prevent
arbitrariness and to ensure accountability. Thus, for the sake of
clarity, fairness and transparency, every decision, particularly
those affecting vital rights and interests, must be supported by
adequate reasoning that demonstrates the application of sound
judgment, in line with recognized legal standards.
7. This Court is also cognizant of the specific directions contained
in State Bank of India and Others vs. Rajesh Agarwal and Others:
2023 SCC OnLine SC 352 wherein also it has been held that any
such order has to be a reasoned one.
8. In the present case, the expression used in the impugned order
lacks clarity. It is crucial to emphasize that the order in question
expressly records that when the show cause notice was issued, the
bank had perceived the account/s as fraud. However, at the time of
final consideration, there should have been some discussion,
elaboration and substantiation. The lack of which clearly
demonstrates that the order fails to provide adequate reasoning
for the classification of the account of petitioner as fraud.
9. In view of the above, the impugned order cannot be said to be
sustainable.
10. The impugned order is, accordingly, set aside."
14. Since the situation in the present case is similar, the abovesaid order
dated 30.03.2024 is also, accordingly, set aside.
15. Needless to say, the respondent Bank would be at liberty to issue a
fresh Show Cause Notice with all supporting documents to the abovesaid
petitioners and would be at liberty to take appropriate decision afresh, after
Digitally Signed W.P.(C) 12719/2024
considering reply, if any, sent by the petitioners.
16. Since learned counsel for respondent/Bank apprehends that there is not
enough of clarity with respect to the contact details of all such petitioners, this
Court asked learned counsel for petitioners to supply the present and correct
contact details of all such petitioners and during course of arguments,
follwoing details have been given:-
S.No. Name Address Mobile No. E-mail ID
1 Pawan 8-2-120/110/1/2 9000010062 [email protected]
Kumar Garg Banjara Hill
Road No.14,
Nandi Nagar,
Hyderabad-500
034 Telangana -
India
2 Mr. Narendra 35 Central 9811060192 [email protected]
Garg Drive, DLF
Farma,
Chhatarpur
Farms Mehrauli,
South
Delhi-10030
3 Mr. Akash B-1302, Mantri 9000010063 [email protected]
Gupta Elegance, NS
Palya,
Bannerghatta
Road,
Bangalore-5600
17. The respondent Bank is, accordingly, at liberty to take further steps and
to send fresh Show Cause Notices as per the abovesaid contact details,
extracted in the order.
18. It is clarified that this Court has not given any observation with respect
to the merits of the case and, therefore, the respondent Bank shall not feel
prejudiced, in any manner whatsoever, with respect to any of the observation
Digitally Signed W.P.(C) 12719/2024
appearing in the present order.
19. Both the petitions along with pending applications are disposed of
accordingly.
(MANOJ JAIN)
JUDGE
MARCH 3, 2025
st/pb
Digitally Signed W.P.(C) 12719/2024
