IN THE HIGH COURT AT CALCUTTA

Civil Appellate Jurisdiction

Original Side

Present:

The Hon’ble Justice Debangsu Basak

And

The Hon’ble Justice Prasenjit Biswas

APOT 390 of 2024

With

IA GA 2 of 2024

Harish Kumar Agarwal & Ors.

Vs.

Axis Bank & Anr.

For Appellants : Ms. Noelle Banerjee, Adv.

Mr. Arkadeb Sinha. Adv. Mr. Mainak Biswas, Adv.

Ms. Simran More, Adv.

For the Private Respondent : Mr. Pourush Bandyopadhyay Adv.

Mr. S. Ganguly , Adv.

For Private Respondent : Mr. Souradeep Banerjee. Adv.

No. 1 (Axis Bank) Mr. Abhidipto Tarafdar, Adv.

Mr. S.K.Banerjee, Adv.

Ms. Sanjana Sinha, Adv.

Hearing Concluded on : August 05, 2025 Judgment on : August 21, 2025

DEBANGSU BASAK, J.:-

1. Appellants have assailed the order dated August 20, 2024

passed by the learned Single Judge in WPO 630 of 2024.

2. By the impugned order, learned Single Judge has

dismissed the writ petition of the appellants.

subha

karmakar Digitaly signed by subha karmakar Date: 2025.08.21

3. Appellants had filed a writ petition assailing the show cause notice dated December 8, 2023 and the order dated May 2, 2024 issued by the bank declaring the accounts of the appellants as fraud.

4. Learned advocate appearing for the appellants has submitted that, Reserve Bank of India issued Reserve Bank of India (Frauds Classification and Reporting by Commercial Banks and select FIs) Directions, 2016. She has submitted that, Supreme Court, in 2023 Volume 6 Supreme Court Cases 1 (State Bank of India and Others versus Rajesh Agarwal and Others) held that, the Directions of 2016 are binding upon the bank. She has submitted that, Supreme Court held that, a bank is obliged to afford an opportunity of hearing to the borrower prior to classifying the account as a fraud, in terms of the Directions of 2016. She has contended that, in the facts and circumstances of the present case, bank did not afford the borrower or the appellants, any opportunity of hearing prior to deciding to classify the accounts of the borrower, as frauds, within the meaning of the Directions of 2016. Consequently, according to her, the impugned decision of the bank dated May 2, 2024 classifying account of the borrower, as fraud, has to be set aside being passed in breach of the principles of natural justice.

5. Elaborating on the issue of breach of principles of natural justice, learned advocate appearing for the appellants has submitted that, a notice dated December 8, 2023 purporting to be a show cause notice under the Directions of 2016 was issued to the appellants. She has drawn the attention of the Court to the person issuing such notice. She has contended that, such person is not the authority, contemplated under the Directions of 2016, to issue a show cause notice. She has drawn the attention of the Court to the reply dated December 22, 2023 given by the borrowers, to the show cause notice. She has submitted that, the reply of the borrower was not considered by the designated authority under the Directions of 2016. She has drawn the attention of the Court to the so-called decision of the bank to classify the account of the borrower as fraud within the meaning of the Directions of 2016 dated May 2, 2024. She has submitted that, again, the designated authority under the Directions of 2016 did not issue the letter dated May 2, 2024.

6. Learned advocate appearing for the appellants has drawn the attention of the Court to the provisions of the Directions of 2016. She has submitted that, in terms of Chapter II clause 2.1.2 fraud, fraud monitoring and fraud investigation function must be owned by the Chief Executive Officer of the Bank, Audit Committee of the Board and the Special Committee of the Board. She has contended that, neither the authority issuing the show cause notice nor the authority which decided on the show cause notice as well as the reply thereto, falls within the categories of authorities described in clause 2.1.2 of the Directions of 2016, empowered to decide on the issue of fraud. Consequently, not only the decision dated May 2, 202