[ Court Doc ]   Civil Revision >> Civil & Consumer Law  

In a recent legal development under Article 226 of the Constitution of India, a petitioner has approached the court seeking redressal against an order dated 05.07.2024 by a banking institution. The order in question classified the petitioner as involved in financial fraud concerning transactions with Punj Lloyd Limited, purportedly under the regulatory framework of the Reserve Bank of India (RBI).

The petitioner's case, presented by Mr. Sandeep Sethi, Senior Advocate, hinges on several key arguments. Firstly, reference is made to a precedent set by a previous court order on 02.04.2024, where procedural deficiencies in a Show Cause Notice (SCN) issued against the petitioner were highlighted and subsequently nullified. Mr. Sethi underscores that according to RBI's Master Directions, any declaration of fraud in banking transactions, especially under consortium arrangements, necessitates a coordinated decision by banks holding at least 60% of the total lending share. The petitioner alleges that the respondent bank did not comply with due process, failing to provide essential documents and denying the petitioner an opportunity for a fair hearing as mandated by judicial precedents like State Bank of India v. Rajesh Agarwal.

On the other side, Mr. Sidhartha B., representing the respondent, counters that individual banks retain the autonomy to conduct independent inquiries into financial discrepancies, even if these findings differ from those of other consortium members. He argues that the respondent's actions were in accordance with RBI guidelines, highlighting forensic audits conducted by other consortium banks rather than at the respondent's instigation.

During the hearing, the court, after hearing arguments from both sides, acknowledged the absence of a proper hearing afforded to the petitioner before the issuance of the impugned order. It raised concerns over the jurisdictional validity of unilaterally declaring the petitioner as 'fraud' without the consensus of consortium banks, a requirement stipulated in RBI's regulatory framework.

In its interim order, the court directed the respondent to submit a response within four weeks and temporarily stayed the enforcement of the 05.07.2024 order until the next scheduled hearing on 17.09.2024. The court permitted the respondent to proceed with reporting to RBI and law enforcement agencies, yet emphasized that such actions should not prejudice the ongoing legal proceedings.