P. C.

1. Rule. Respondents waive service. With the consent of the parties, Rule made returnable forthwith and heard finally.

2. The above Writ Petition is filed seeking an appropriate writ, order or direction declaring any and all acts emanating from the impugned order (Exhibit-O to the Petition), the impugned Show Cause Notice (Exhibit-E to the Petition), the Forensic Audit Report dated 7th August 2024( Exhibit-I to the Petition) and consequent thereto, declaring/classifying the account of Petitioner No.1 as “fraud” in terms of the 2024 Fraud Master Directions as being illegal, null and void. A further relief is sought to restrain Respondent No.1 from in any manner proceeding with the impugned order dated 21st June 2025 (Exhibit-O to the Petition) and all consequent action and proceedings emanating therefrom.

3. Mr. Joshi, the learned Senior Counsel appearing on behalf of the Petitioners, raised several grounds to challenge the impugned order passed by the 1st Respondent Bank inter alia classifying the account of a company called as “Future Lifestyle Fashions Limited” ( for short “FLFL”) as “fraud”, and consequently, also classifying the Petitioners as “fraud”, who were, as Mr. Joshi claims, “Non Executive Directors of the FLFL”. It is undisputed that the Petitioners were the Promoters of the FLFL. The grounds of the challenge are:-

(a) the impugned order passed by the 1st Respondent Bank classifying the Petitioners as “fraud” is completely unreasoned. According to Mr. Joshi, as per the Master Directions on Fraud Risk Management in Commercial Banks (including Regional Rural Banks) and All India Financial Institutions dated 15th July 2024 (for short “Fraud Master Circular of 2024”), and more particularly Clause 2.1.1.4 thereof, the 1st Respondent Bank is mandated to pass an order giving reasons classifying the accounts of any party as “fraud”. According to Mr. Joshi, when one peruses the impugned order, it merely reproduces the Forensic Audit Report (“FAR”), and that too incorrectly, and thereafter merely reaches the conclusion that the account of FLFL and consequently the Petitioners is declared as “fraud”. He submitted that by no stretch of the imagination can one term the impugned order passed by the 1st Respondent Bank as reasoned. Mr. Joshi thereafter submitted that this is more-so when one takes into consideration that a detailed reply to the Show Cause Notice, as well as the allegations in the FAR, was given by the Managing Director of FLFL (Noticee No.4) vide his letter dated 7th February 2025, and which can be found at Exhibit-N to the Petition. There is absolutely no consideration of this reply in the impugned order;

(b) the FAR, and which is the sole basis on which the impugned order is based, is inconclusive. In this regard, Mr. Joshi submitted that if one peruses the FAR, the Auditors infact have stated in many cases that further investigation is required. Further, in fact, there is now an Addendum to the FAR [at the behest of the Bank of Baroda] which completely exonerates the Petitioners with respect to related party transactions, and which is one of the allegations for classifying the Petitioners as “fraud”. Mr. Joshi submitted that in the event the FAR is inconclusive, under the Fraud Master Circular of 2024, and more particularly Clause 4.1.2 thereof, the bank has to then conduct its own internal investigation/assessment before classifying the account of the Petitioners as “fraud”. In the present case, atleast on a reading of the impugned order, it does not appear that the bank has carried out any internal investigation / assessment for the purposes of classifying the accounts of FLFL and consequently the Petitioners, as “fraud”.

(c) The documents sought by the Petitioners were not provided as is reflected in several letters written by the Petitioners to the 1st Respondent Bank.

(d) the impugned order refers to a second Show Cause Notice that was never served upon the Petitioners.

For all these reasons, M