Back
2025 Supreme(Online)(DEL) 426
HIGH COURT OF DELHI
HON'BLE THE CHIEF JUSTICE, C, Tushar Rao Gedela, JJ
IDBI BANK LTD – Appellant
Versus
GAURAV GOEL & ORS. – Respondent
LPA-536/2024
Mr. V. P. Singh, Adv. with Ms. Dacchita Shahi, Mr. Akshat Singh, Mr. Bhanu Gupta, Mr. Utkarsh Kandpal and Mr. Adeem Ahmed, Advs.; Mr. Pulkit Prakash, Adv. with Ms. Nidhi Vardhan, Ms. Shakshi Goyal and Mr. Kanishk Arora, Advs. for R-1 to R-4; Mr. Ramesh Babu, Adv. with Ms. Manisha Singh, Ms. Tanya Chowdhary, Ms. Jagriti Bharti and Mr. Rohan Srivastava, Advs. for RBI.
The principle of audi alteram partem mandates personal hearings in administrative proceedings under RBI Directions before classifying accounts as fraudulent.
Headnote:
(A) Reserve Bank of India (Master Directions on Frauds Classification and Reporting by Commercial Banks and Select FIs) Directions 2016 - The principle of audi alteram partem applies to administrative actions, including those under the RBI Directions, necessitating an opportunity for personal hearing before classifying an account as fraud. (Paras 10, 12, 14, 20, 22)
(B) Administrative Law - The rule of audi alteram partem is mandatory when administrative actions result in civil consequences, ensuring fairness in proceedings. (Paras 12, 14)
Facts of the case:
The appellant, IDBI Bank, challenged a direction from a Single Judge allowing respondents to request personal hearings before classifying accounts as fraudulent, arguing it misinterpreted the Supreme Court's ruling in Rajesh Agarwal. (Paras 1, 2, 3)
Findings of Court:
The court upheld the Single Judge's direction, affirming that the principle of audi alteram partem applies, requiring personal hearings in fraud classification under RBI Directions. (Paras 25, 26)
Issues: The primary issue was whether the principle of audi alteram partem includes the right to personal hearing in administrative proceedings under the RBI Directions. (Paras 10, 20)
Ratio Decidendi: The court concluded that the Supreme Court's ruling in Rajesh Agarwal mandates personal hearings in fraud classification cases, emphasizing the necessity of fairness in administrative actions. (Paras 14, 22)
Result: Appeal dismissed.
| Table of Content |
|---|
| 1. idbi bank challenges direction (Para 1) |
| 2. misreading of supreme court judgment (Para 2 , 3) |
| 3. rbi directions and fair hearing (Para 4) |
| 4. application of audi alteram partem (Para 5 , 6 , 7 , 8 , 14) |
| 5. consideration of submissions (Para 9) |
| 6. right to personal hearing (Para 10) |
| 7. nature of procedure under rbi directions (Para 11 , 12 , 13) |
| 8. consequences of classification as fraud (Para 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24) |
| 9. dismissal of appeal (Para 25 , 26 , 27) |
JUDGMENT :
DEVENDRA KUMAR UPADHYAYA, C.J.
1. By instituting the proceedings of this intra-court appeal, the appellant/ IDBI Bank Limited (hereinafter referred to as ‘IDBI Bank’) seeks to challenge partially the judgment and order dated 22.05.2024 passed by the learned Single Judge in W.P. (C) No. 3733/2024 to the extent it directs that petitioners (respondents herein) will be at liberty to make request for personal hearing to the IDBI Bank, which shall be considered accordingly.
2. Impeaching the impugned direction given by the learned Single Judge vide judgment and order dated 22.05.2024, it has been argued by learned counsel appearing for the IDBI Bank that the said direction is based on misreading of the judgment of the Hon’ble Supreme Court in State Bank of India and others v. Rajesh Agarwal and Others, (2023) 6 SCC 1 (hereinafter referred to as ‘ Rajesh Agarwal ’) inasmuch as, that in the said judgment what all has been provided by the Hon’ble Supreme Court is that an opportunity of hearing to the borrowers should be provided before passing an order declaring the account of the borrower as fraud, however, which should not be construed as opportunity of personal hearing.
3. It has further been argued that proceedings drawn consequent upon a show cause notice issued under the Reserve Bank of India (Master Directions on Frauds Classification and Reporting by Commercial Banks and Select FIs) Directions 2016. (hereinafter referred to as the ‘RBI Directions’) are administrative proceedings and, therefore, the process of fair hearing need not be at the standard of a judicial proceeding and, consequently, opportunity of personal hearing in such proceedings is not available. In this view, the submission is that the impugned direction issued by the learned Single Judge that petitioners – respondents herein will be at liberty to make request for personal hearing is not lawful.
4. Drawing our attention to an order passed by Hon’ble Supreme Court on a Miscellaneous Application No. 810 of 2023 in Civil Appeal No. 7300 of 2022 in State Bank of India & Ors v. Rajesh Agarwal & Ors, dated 12.05.2023 which was filed by the State Bank of India, expressing certain apprehensions to the effect that the judgment in Civil Appeal No. 7300 of 2022 may be interpreted to mean that ground of personal hearing is mandatory, though it has not been so directed in the conclusions set out in the said judgment, it has been argued that the said order dated 12.05.2023 makes the legal position clear that in the proceedings drawn under the RBI Directions, there is no scope of providing the borrowers a personal hearing.
5. Submission, thus, is that the learned Single Judge has misread the judgment of the Hon’ble Supreme Court in the case of Rajesh Agarwal (supra) and has also not taken into account the order dated 12.05.2023 passed by the Hon’ble Supreme Court while issuing the impugned direction.
6. Opposing the appeal, it has been contended by learned counsel representing the respondents that there is no illegality or irregularity in the impugned direction issued by the learned Single Judge by means of the judgment dated 22.05.2024 for the reason that the judgment of the Hon’ble Supreme Court in Rajesh Agarwal , (supra) has correctly been applied and relied upon to conclude that the proceedings drawn under the RBI Directions require that application of the principle of audi alteram partem cannot be impliedly excluded under the RBI Directions on frauds and that what has been held b
