The classification of an account as fraud involves the right to representation but does not mandate a personal hearing under the Master Directions on Fraud. This aligns with the principles of natural justice as clarified in Rajesh Agarwal (2023) 6 SCC 1.

JUDGMENT :

Revati Mohite Dere, J.

1. By this petition, the Petitioner challenges the show- cause notice dated 20^th December 2023 issued by the Respondent No.1 – State Bank of India (“SBI”) and the resultant order dated 13^th June 2025 passed by the Respondent No.1, classifying the account of Reliance Communications Ltd. (“RCOM”) as ‘fraud’ and reporting the name of the Petitioner to the Respondent No.2 – Reserve Bank of India (“RBI”) in terms of the Master Directions on Fraud Risk Management in Commercial Banks (including Regional Rural Banks) and All India Financial Institutions dated 15^th July 2024 (“Master Directions 2024”) and as such seeks quashing and setting aside of the same.

2. Brief facts giving rise to this petition with which we are concerned, are as under:

a) On 22^nd September 2012, the Respondent No.1 – SBI sanctioned term loans of INR 1500 Crore to RCOM; INR 125 Crore to Reliance Telecom Limited (hereinafter referred to as ‘RTL’) and also a non-fund based facility to the tune of INR 859.59 Crores to RCOM.

b) On 29^th August 2016, the Respondent No.1 – SBI sanctioned term loans of INR 565 Crore to RCOM and INR 635 Crore to Reliance Infratel Limited (hereinafter referred to as ‘RITL’).

c) On 1^st July 2016, the RBI notified the Master Directions on Fraud – Classification & reporting by Commercial Banks & Select Financial Institutions (‘Master Directions 2016’).

d) In 2017, since RCOM failed to comply with its obligations under restructuring of above-mentioned loans, i.e. the RCOM defaulted in payments of SBI, the account of RCOM was declared as a non-performing Asset by the Respondent No.2 – RBI with effect from 26^th August 2016, in accordance with the RBI directions.

e) On 20^th December 2023, the Respondent No.1 – SBI issued a show-cause notice to RCOM, with a copy of the same marked to the Petitioner and four other individuals, regarding the conduct of RCOM’s bank account and suspected fraudulent activity. It is pertinent to note, that on 10^th November 2020, the Fraud Identification Committee of Respondent No.1 declared RCOM account as ‘fraud’. However, the said decision was recalled in view of the Apex Court’s decision in State Bank of India v. Rajesh Agarwal & Others, (2023) 6 SCC 1 as no notice or opportunity to make a representation had been given to the parties prior to the said decision. Accordingly, a fresh show-cause notice dated 20^th December 2023 was issued (hereinafter referred to as `impugned SCN’).

f) On 3^rd January 2024, the Petitioner addressed his response to the impugned SCN, raising therein certain preliminary objections. The gist of the objections was:

(i) that RCOM being under CIRP, the Resolution Professional was vested with the management of RCOM. Consequently, the Petitioner did not have possession of the relevant documents/information, thereby preventing him from giving an effective response to the contents of the impugned SCN.

(ii) that the impugned SCN was bereft of any information regarding the basis for arriving at the conclusions stated therein; that there were no timelines specified in relation to the allegations, and that no specific role was ascribed to the Petitioner, making it extremely difficult for the Petitioner to respond to the alleged irregularities and to the perceived suspicion of fraud.

Furthermore, the Petitioner was not involved in the day-to-

day affairs of RCOM.

(iii) that no effective opportunity was given to the Petitioner to submit his response / reply, in the absence of all the relevant documents forming the basis of the impugned SCN.

(iv) that the allegations of fraud were without any specific details or relevant documents and as such the impugned SCN was in breach of the principles of natural justice.

(v) that access to docu