Natural justice principles demand notice and opportunity for personal hearing before classifying bank accounts as fraud, ensuring that parties have the chance to defend their rights against severe penalties.

JUDGMENT :

VIKAS MAHAJAN, J.

1. The present petition has been filed with the following prayer:

“i. Quash and set aside the Impugned Circular bearing number DBS. CO.CFMC.BC.No.1/23.04.001/2016-17 dated 01.07.2016 issued by the Respondent No. 1 to the extent it violates Article 14 of the Constitution of India in as much as it is vague and does not follow the basic principles of natural justice;

ii. Issue a Writ of Mandamus or any other appropriate Writ for quashing/setting aside the impugned action of Respondent No. 2 Bank, Respondent No. 4 Bank and Respondent No. 5 Bank, if any, in declaring the account of the Petitioner No. 1 Company as well as the Petitioners No. 2 - 4 as a Fraud Account;

iii. Issue a Writ of Mandamus or any other appropriate Writ for quashing/setting aside the impugned action of Respondent No. 3 Bank, in declaring the account of the Petitioner No. 1 Company as well as the Petitioners No. 2 -4 as a Fraud Account;

iv. Declare the Forensic Audit purported to have been conducted by the Respondent No. 2 Bank, Respondent No. 3, Respondent No. 4 Bank and Respondent No. 5 Bank as invalid and in complete contravention to the due process laid down by law;

v. Allow the present Petition and pass a Writ of Mandamus or Certiorari or any other appropriate Writ, Order or Direction for quashing/recalling the effect and operation of any action, taken, contemplated or threatened by the Respondent No. 2 Bank, Respondent No. 3, Respondent No. 4 Bank and Respondent No. 5 Bank of categorizing the Petitioner No. 1 & 4 Company as a “Fraud”;”

2. Essentially, the grievance of the petitioners in the present petition is that accounts of the petitioners have been classified as ‘Fraud’ by respondent nos. 2 to 5 without complying with the principles of natural justice. Furthermore, case of the petitioners is that the order of the respondent nos. 2 to 5 whereby the accounts have been classified as ‘fraud’, has not been communicated to the petitioners till date.

3. Respondent nos. 2 to 5 are represented by their respective counsels.

4. On a specific query posed by the Court as to whether the respondent no.4/HDFC has classified the accounts of petitioners as ‘Fraud’, Mr. Siddharth Singh, learned counsel appearing on behalf of respondent no.4/HDFC, on instructions, submits that no decision has been taken by the respondent no.4/HDFC Bank to classify the account of petitioners as ‘Fraud’.

5. Insofar as respondent no.3/Union Bank of India [UBI], as well as, respondent no.5/Bank of Baroda [BOB] are concerned, Mr. O.P. Gaggar, learned counsel appearing on behalf of the said banks, submits that a decision has already been taken by the said banks to classify the accounts of the petitioners as ‘Fraud’ and Fraud Monitoring Returns [FMR] have also been filed to that effect.

6. Likewise, Mr. Vivek Jain, learned counsel appearing on behalf of the respondent no.2/PNB, on instructions, submits that a decision has been taken by the respondent no.2/Punjab National Bank [PNB] to classify the accounts of the petitioners as ‘Fraud’.

7. However, on being asked by the Court, neither Mr. Gaggar nor Mr. Jain, have been able to point out from the record or produce the said decisions or orders of the respective banks classifying the accounts of the petitioners as ‘Fraud’.

8. Mr. Manik Dogra, learned senior counsel appearing on behalf of the petitioners refers to the FMR of respondent no.3/UOI to contend that a Joint Lender’s Meeting was held on 23.06.2022 where the findings of the purported forensic audit report were discussed. He submits that as per the FMR, basis said forensic audit report, it was