Punjab-Haryana High Court
Pankaj Tandon vs Idbi Bank Limited And Ors on 3 July, 2024
Author: Anupinder Singh Grewal
Bench: Anupinder Singh Grewal
BS
EA =
aS
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHAND GARH
286/2 CWP-23744-2023
DATE OF DECISION: 03.07.2024
PANKAJ TANDON ... Petitioner (s)
Versus
IDBI BANK LIMITED 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
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
CWP-23744-2023
87. The conclusions are summarized below:
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
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
