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IN THE HIGH COURT OF JUDICATURE AT MADRAS
Mr. Justice D.Bharatha Chakravarthy, J
Nandhi Dall Mills – Appellant
Versus
Fraud Examination Committee (Fec)-ii – Respondent
ORDER :
This Writ Petition is filed to call for the records pertaining to the communication dated 17.02.2025 issued by the respondent and to quash the same.
2. Heard M/s.K.R.Ananda Gomathy, the learned counsel appearing on behalf of the petitioners and Mr.Shivakumar, the learned counsel appearing on behalf of the respondent Bank.
3. The learned counsel for the petitioners taking this Court through the show cause notice would contend that in this case the allegation is made only because a sister concern was permitted to use the same premises. The same does not in any manner would amount to fraud. When the show cause notice was received, a legal notice was issued seeking for particulars including whether any special audit that is done. Without furnishing the said particulars and grant of proper opportunity to the petitioners straight away the account has been declared as fraudulent, aggrieved by which, the petitioners are before this Court. The learned counsel would submit that firstly, as per the Clause 2.1.3 of the circular belonging to the Reserve Bank of India dated 15.07.2024 that governs the issue, a Committee should have been constituted with at least two independent Directors.
4.
The classification of a loan account as fraudulent by a bank does not require an independent committee if the bank follows its internal policies and guidelines as per RBI regulations.
Point of Law : Respondent- Bank has not complied with the principles of natural justice cannot be looked into at this stage more particularly, when the respondent-bank after considering the three aud....
Classification of accounts as 'fraud' requires adherence to procedural fairness, including consideration of responses from affected parties, as mandated by RBI Master Directions.
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 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.
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.
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