JUDGMENT :

OM NARAYAN RAI, J.

1. This writ petition mounts challenge to the action of the respondent Bank in declaring the accounts of SREI Infrastructure Finance Limited and SREI Equipment Finance Limited (hereafter collectively referred to as “SREI Entities”) maintained with the said Bank, as “fraud” on April 7, 2022 as also to the notices dated December 26, 2024 issued to the petitioners thereby calling upon the petitioners to show cause as to why the aforesaid accounts standing in the name of the SREI Entities would not be declared as fraud.

2. It is the petitioners’ case that the impugned show cause notices themselves would reveal, that the aforesaid accounts had been declared as “fraud” on April 7, 2022 meaning thereby that the said show-cause notices were issued ex post facto i.e. subsequent to the declaration of the aforesaid accounts as fraud and that being so the declaration that preceded the show cause notices is bad in law.

3. Mr. Chowdhury, learned senior advocate appearing for the petitioners submits that declaration of an amount as fraud leads to evil and civil consequences and such action cannot be undertaken by the bank without first affording an opportunity of hearing to the persons affected (in this case the petitioners).

4. It is further submitted that the very fact that notices to show cause have been issued subsequent to the declaration of the aforesaid accounts of SREI Entities as fraud would establish that the declaration was done without hearing the petitioners and the bank is now trying to correct the incorrigible by issuing notices to show cause subsequently.

5. In support of his contention that any action of declaring an account as fraud must be preceded by an opportunity of hearing to the persons concerned, Mr. Chowdhury has relied on the following judgments:-

1. State Bank of India & Ors. v. Rajesh Agarwal & Ors.  (2023) 6 SCC 1

2. Indian Commodity Exchange Ltd. v. Neptune overseas Ltd. & Ors.  (2020) 20 SCC 106

3. T. Takano v. Securities & Exchange Board of India & Anr.  (2022) 8 SCC 162

4. Milind Patel v. Union Bank of India & Ors.  (2024) 251 Comp Cas 1

6. He has also relied on a Coordinate Bench judgment of this Court in the petitioner no.1’s own case being WPA No. 28329 of 2023 (Hemant Kanoria v. Bank of India) decided on February 2, 2024 along with other three writ petitions filed by the petitioner no.1.

7. In the said case, a Coordinate Bench of this Court after taking into consideration several authorities, delineated the steps, which are required to be taken by a Bank in matters like the one at hand. The observations made by the Coordinate Bench, which are relevant for the present matter are follows:-

“64. First, a show-cause notice is to be issued, enumerating the exact offences alleged against the borrower/Director. If any FAR or other document forms the basis of the show-cause, the same is to be served along with the show-cause notice. (Both the said criteria have, in fact, have been satisfied in the present case in respect of BOI, BOB and UBI.)

65. A fortnight thereafter would be ample time to give reply to the show-cause notice. In its reply, the noticee shall, apart from addressing the allegations and controverting those specifically, specify the documents which are required to be provided to the noticee by the Banks/financial institutions. If necessary, in the reply, the borrower/Director or promoter can reserve its rights to give a further additional reply upon receiving such documents.

66. Within a week from receiving such replies, the Banks can give an inspection of the documents, if extremely voluminous, and/or furnish copies of the particular documents which are sought by the borrower.

67. Within a further fortnight, if necessary, the noticee/borrower can be given an opportunity to file additional reply, in the light of the documents which have by now been inspected / served on them. Thereafter, a hearing shall be fixed by the bank on the basis of the reply.

68. Upon such hearing being conclud