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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
R.I.Chagla, Farhan P.Dubash
Jawaharlal Rijhumal Gangaramani – Appellant
Versus
Union Bank of India – Respondent
JUDGMENT :
1. Rule. Rule made returnable forthwith. Heard by consent of parties.
2. By this Writ Petitions the Petitioners are seeking a declaration that the acts of the Respondent Nos. 1 and 2 of declaring / classifying the accounts of the Petitioners as “fraud” and the impugned order dated 19th September 2025 in terms of the Reserve Bank of India (Fraud Risk Management in Commercial Banks including Regional Rural Banks) and All India Financial Institutions) Directions, 2024 (“RBI Master Directions”) as being illegal, null and void, and ultra vires the RBI Master Directions. Consequential prayers have also been sought.
3. The Respondent – Union Bank of India (“Bank”) had commissioned a Forensic Audit Report of Backbone Tarmat Alfaraa JV (BTA) which was completed on 5th December 2019. The Report highlighted alleged misuse of credit facilities availed by BTA from the Respondent – Bank as well as alleged irregular Letters of Credit, inflated stock statements and fund diversions in BTA Accounts. The Forensic Audit Report was placed before the Central Level Fraud Scrutiny Committee (Empowered Committee to examine the accounts/incidents from the angle of fraud) of Respondent – Bank on 21st
Classification of accounts as 'fraud' requires adherence to procedural fairness, including consideration of responses from affected parties, as mandated by RBI Master Directions.
A bank must adhere to principles of natural justice by providing borrowers with necessary documents and an opportunity to be heard before classifying accounts as fraud.
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....
The classification of an account as fraud must adhere to principles of natural justice, including providing a reasoned order and opportunity to be heard.
The classification of borrowers as fraud must adhere to principles of natural justice, requiring a fair hearing and proper procedural compliance as mandated by law.
The principle of Audi Alteram Partem must be applied before classifying an account as fraud under RBI guidelines, ensuring borrowers are given a fair opportunity to be heard.
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