Judgment :

Krishna Rao, J.

1. In both writ applications, the writ petitioners have challenged the show cause notice dated 25th October, 2023 wherein the petitioners have called upon to show cause as to why their accounts/names should not be categorized and reported as fraud to the Reserve Bank of India and the order dated 9th August, 2024 wherein the bank has reported the account of the petitioners as fraud to the Reserve Bank of India on 16th July, 2024 vide FMR No. PNB2403-0361.

2. The petitioner Company (presently in liquidation) had availed loan from the consortium of banks led by the Punjab National Bank for setting up a Thermal Power Project in Raigarh District in the State of Chhattisgarh. The respondent no.1 had sanctioned a loan in the name of the Company in the month of March, 2010 for the said project. Before the Company could complete the erection and installation, the coal block allotted to the company was cancelled by the Central Government pursuant to the orders passed by the Hon’ble Supreme Court in the month of September, 2014. Due to the de-allocation of Coal Block in terms of the order passed by the Hon’ble Supreme Court, the banks withheld further disbursements as there was no clarity with regard to the supply of coal. The de-allocation of coal block jeopardizes the project, and as a result the erection and installation work for the project was put in hold and the project could not achieve its commercial operations. In view of the said facts, the stoppage of fund disbursement by several members of the consortium of bankers including the respondent no.1 had cascading effect on the accounts of the company and the account of the company was declared as Non-Performing Assets on 31st March, 2016.

3. In the year 2017, one of the consortium lenders being Bank of Maharashtra filed proceedings against the company for initiating the Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code. The Learned National Company Law Tribunal, Kolkata Bench admitted the application and initiated Corporate Insolvency Resolution Process and subsequently, upon no resolution plan being received, the Learned Tribunal by an order dated 11th October, 2018, ordered for the commencement of liquidation proceedings of the company and appointed a Liquidator. Based on a mandate given by the Liquidator to conduct a Forensic Audit in the Company, a Transaction Audit Report was prepared by M/s Deloitte Touche Tohmastu India LLP and the Liquidator after receiving instructions from the Committee of Creditors including the respondent no.1 filed an application before the NCLT with the allegation of fraudulent, preferential and undervalued transactions on the basis of the Transaction Audit Report.

4. The Liquidator approached the Learned National Company Law Tribunal for cancellation of certain transactions on the basis of the allegations. The application filed by the Liquidator was rejected by the Learned Tribunal. The Learned Tribunal by the said order not only rejected the plea of the Liquidator that the various transactions covered under the Audit Report alleged to be fraudulent, but also rejected the plea of the Liquidator that the said transactions could possibly be preferential or undervalued. The Order of the Learned NCLT was affirmed by the Appellate Tribunal.

5. In the meantime, the respondents initiated criminal proceedings with the Central Bureau of Investigation. From the complaint, the petitioners came to know that the respondent nos.1 and 2 had purportedly declared the account of the company as fraud and reported to RBI on 11th June, 2019. The respondent nos. 1 and 2 have declared the account of the petitioners on the basis of the Transaction Audit Report prepared by Delottie. The petitioners filed a writ petition being WP(C) No. 4458 of 2021 before the Delhi High Court challenging the vires of the RBI Master Directions on Frauds - Classification and Reporting by Commercial Banks and select FI’s dated 1st July, 2016.