Orissa High Court
Bidhubhusan Nayak vs Punjab National Bank on 10 July, 2025
Author: Mruganka Sekhar Sahoo
Bench: Mruganka Sekhar Sahoo
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.A. No. 1847 OF 2024
Bidhubhusan Nayak .... Appellant
Mr. Ashok Panigrahi, Sr. Advocate
Mr. Pratik Dash, Advocate
-versus-
Punjab National Bank, Represented by .... Respondent
its M.D. & C.E.O-cum-Chairman of
Review Committee, New Delhi
& others
Mr.Anjan Kumar Biswal, Advocate
CORAM:
JUSTICE DIXIT KRISHNA SHRIPAD
JUSTICE MRUGANKA SEKHAR SAHOO
ORDER
Order No. 10.07.2025
03. 1. This matter is taken up through hybrid mode.
2. Shorn off thickness of the paper book, the essential
grievance of the appellant can be stated in short. The subject
company being the borrower had suffered branding of its loan
account as 'Fraudulent'. Learned Single Judge having not been
impressed, denied relief to the appellant and therefore, this Intra-
Court appeal has been preferred against the judgment dated
26.04.2024 in W.P.(C) No.12394 of 2023.
3. The short question that arises for our consideration can be
articulated as under:
Can the banker like the respondent herein brand
its bank account as the 'Fraudulent Account'
unilaterally that is without giving an opportunity
of hearing?
This question is no longer res integra, in view of the Apex
Court decision in State Bank of India V. Rajesh Agarwal, AIR
2023 SC 1859, wherein it has been ruled that respondent-bank
of the kind cannot brand a loan account as 'Fraudulent' without
giving an opportunity of hearing to the concerned, i.e.,
Directors of the Company, as it would mean in this case.
4. Learned Senior Advocate appearing for the appellant
succinctly submits that the predecessor Bank, namely, United
Bank of India has branded borrower company's loan account as
'Fraudulent' in gross violation of the extant Reserve Bank of
India guidelines as interpreted in Rajesh Agarwal Supra and
this aspect having not been properly treated by the learned
Single Judge despite urgement, the impugned judgment is liable
to be voided on the sole ground of violation of principles of
natural justice, although there are other grounds.
5. Learned panel counsel representing the respondent-bank
resists the appeal making submission in justification of the
impugned judgment and reasons on which it has been
structured. He tells us that an Intra-Court appeal of the kind by
its very nature has limitations and they come on the way of
Court undertaking a deeper examination of the issues canvassed
on its floor.
6. Having heard the learned counsel for the parties and
having perused the appeal papers, we are inclined to grant
limited indulgence in the matter as under and for the following
reasons:
6.1. It hardly needs to be stated that lender banks of the kind
answer the description of the State under Article 12 of the
Constitution of India and their actions can be judiciary
reviewed in writ jurisdiction vide Gujarat State Financial
Corporation V. Lotus Hotels Private Limited, (1983) 3 SCC
379, though the grievance has some contractual elements
arising from loan arrangement. Learned counsel appearing for
the appellant is right in telling us that Banks of the class are
governed by extant RBI guidelines which have statutory force
and therefore their violation would give rise to a Choate cause
of action for founding a proceeding of this nature. If learned
Single Judge could review the action of the Bank on merits, it
goes without saying that this Court being the appellate forum
has the coextensive power to undertake the exercise, since
appeal is the continuation of the original proceeding. Therefore,
argued constraints of Inter-Court appeal do not come in the
way.
6.2. As already mentioned above, the fact matrix of the case
lies in a narrow compass. The borrower company having
defaulted, its loan account came to be branded as 'Fraudulent'
vide subject entry in the loan records of the Bank. Matter did
not end there. Similar entry has been reflected in Central Fraud
Registry allegedly maintained under the aegis of Reserve Bank
of India. There is no much dispute that such a certification of
the loan account was effected without giving an opportunity to
the appellant herein, who according to the Bank's panel
counsel, is a signatory to the loan records. Be that as it may, no
person can be condemned unheard, vide Audi Alterem Partem.
Branding a loan account as 'Fraudulent' will have far reaching
implications on the stake holders like the borrowers/guarantors.
It is not in dispute that the extant RBI Guideline prescribes a
procedure which includes providing an opportunity of hearing.
The Apex Court more or less on the point argued herein, has
held that such an extreme action cannot be taken by the Bank
without giving an opportunity of hearing as provided under the
extant RBI Guidelines which have statutory force. On this
count itself, the impugned judgment is liable to be voided and
matter needs to be remanded for fresh consideration qua the
appellant.
6.3. Much need not be stated about the sanctity of the
principles of natural justice in a system founded on the rule of
law. Biblical literature tells us that even the god is said to have
given an opportunity of hearing to Adam and Eve before
punishing them for eating the proscribed fruit in the Eden
Garden. If that be so, mortal men have no justification for
putting anyone to the prejudice sans an opportunity of hearing.
Ordinarily, in a matter of contract, the principles of natural
justice are not invokable subject to all just exceptions. When it
comes to action of public authorities as distinguished from
contractual ones, as is the case at hand, the principles of natural
justice need to be read into the statutory instruments like the
RBI Guidelines which are binding, unless a contrary is
indicated therein consistent with what the Apex Court has
observed in Mohinder Singh Gill V. The Chief Election
Commissioner, AIR 1978 SC 851. No such exclusion is
pointed out. Therefore, contention to the contrary passionately
advanced by the learned Bank's counsel pales into
insignificance, rigor of law being what it is. It hardly needs to
be reiterated that the impugned action of the Bank is apparently
prejudicial to the borrowers/guarantors/sureties. Thus, the
prejudice is demonstrable on the face of the record and by the
presumption that stands otherwise unrebutted.
In the above circumstances, this appeal is allowed in part
and the impugned order of learned Single Judge is set at naught.
Appellant's W.P.(C) No.12394 of 2023 having been partly
favoured, a Writ of Certiorari is issued quashing the subject
action of the respondent-bank whereby the loan account in
question is branded as 'Fraudulent' and as a consequence, the
similar entry reflected in Central Fraud Registry vide UDB-
1404-0015 is masked qua the appellant only.
Matter is remitted back to the portals of Bank for
consideration afresh in accordance with law and after giving an
opportunity of hearing to the appellant. All contentions of the
parties are kept open and costs are made easy, in the
circumstance.
It is made clear that the benefit of this order is confined
to the appellant herein.
(Dixit Krishna Shripad)
Judge
Digitally Signed Judge
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 10-Jul-2025 18:12:44
