IMPORTANT POINTS
(1) Information in cognizable offences – An administrative action and a criminal proceeding stand on different footings – FIR, by taking cognizance of an offence, merely sets law into motion – This has nothing to do with a decision on administrative side, made by a different authority.
(2) Quashing of criminal proceedings – No opportunity of being heard is required before FIR is lodged or registered – Setting aside of an administrative action on the grounds of violation of principles of natural justice does not bar administrative authorities from proceeding afresh.

JUDGMENT

M. M. Sundresh, J.

1. Leave granted.

2. The Reserve Bank of India (hereinafter referred to as the “RBI”) issued the Master Directions on Frauds – Classification and Reporting by commercial banks and select FIs, dated 01.07.2016 (hereinafter referred to as “Master Directions”). The Master Directions had been formulated with the objective of providing a framework for banks, to enable early detection and reporting of frauds, and consequently taking actions in a timely manner. In view of the same, the Appellant-Banks initiated administrative actions that affected the respondents, by declaring the companies’ bank accounts as fraudulent - an action which had significant civil consequences delineated in the Master Directions. The Appellant-Banks also initiated criminal proceedings against the respondents, with respect to fraudulent activity that was detected, as the Master Directions require the Banks to refer certain categories of cases to the State Police or the Central Bureau of Investigation (hereinafter referred to as “CBI”), as a general rule. Aggrieved by the same, the respondents approached different jurisdictional High Courts, challenging the validity of the Master Directions, and the actions taken consequently.

3. The High Courts, vide the impugned orders, have quashed not only the administrative actions initiated in pursuance of the Master Directions, but also the First Information Reports (FIRs) registered and the subsequent criminal proceedings initiated against the respondents. Placing reliance upon the ratio of the judgment of this Court in State Bank of India and Others v. Rajesh Agarwal and Others, (2023) 6 SCC 1 (hereinafter referred to as “Rajesh Agarwal’s case”), the administrative actions were quashed primarily on the ground of non-adherence to the principles of natural justice, more specifically the principle of Audi Altarem Partem, as the concerned respondents were not given an opportunity of being heard before the companies’ bank accounts were declared as fraudulent/blacklisted. The High Courts consequently quashed the criminal proceedings initiated against the respondents, holding that they are a natural corollary to the administrative action of declaring the aforementioned bank accounts as fraudulent.

SUBMISSIONS

4. The learned Solicitor General (SG) & Additional Solicitor Generals (ASGs) for the Appellant-CBI submitted that the High Courts ought not to have equated the administrative actions initiated in pursuance of the Master Directions with the criminal proceedings. A civil or an administrative action stands on a different footing in comparison to a criminal proceeding. In some cases, the High Courts have erroneously quashed the FIRs and the subsequent criminal proceedings, despite no prayer being made for the same. In certain other cases, the Appellant-CBI, despite being a necessary party, has not been heard. In few others, the Appellant-CBI has not even been impleaded as a respondent before the High Courts. Finally, it is submitted that the High Courts have misinterpreted the judgment delivered by this Court in Rajesh Agarwal’s case (supra) while passing the impugned judgments. The learned SG and ASGs placed reliance upon paras 37 to 40 and 98 of Rajesh Agarwal’s case (supra) to reinforce their submissions.

5. The learned senior counsel and learned counsel appearing for the respondents submitted that the High Courts have rightly appreciated the ratio of the judgment of this Court in Rajesh Agarwal’s case (supra). The criminal proceedings are a consequence of the administrative actions initiated in pursuance of the Master Directions issued by the RBI. Hence, the High Courts were right in quashing the FIRs and the subsequent criminal proceedings. It is an admitted position that the administrative actions initiated in pursuance of the Master Directions, were taken without adhering to the principle of Audi Altarem Partem. Hence, no interference is warranted with the impugned judgments.

DISCUSSION

6. Having