DHARMESH SHARMA, J. (ORAL)

1. Learned counsel for the respondent no. 1 bank appears on advance notice and submits that the Court may pass appropriate directions as per the law. Learned counsels for respondent no. 2 & 3 although have given their attendance are not present.

2. Having heard learned counsels for the parties, it is clear that the declaration of „Fraud‟ on the petitioners‟ account, who are the suspended directors of the respondent no. 11 company, by the respondent banks no. 1 to 3 is clearly in violation of the judgment passed by the Supreme Court in the case of State Bank of India v. Rajesh Aggarwal 1 . The Supreme Court has categorically held that the Principles of Natural Justice, particularly the Rule of Audi alteram partem, must be necessarily read into the Master Directions on „Fraud‟ to prevent it from being arbitrary. It has been categorically held that classification of „Fraud‟ entails serious civil consequences for the borrower; therefore, a reasonable opportunity must be granted to the concerned persons. The relevant findings by the Supreme Court are as under:

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67. The Master Directions on Frauds do not expressly exclud