The classification of borrower accounts as fraudulent must adhere to due process including audi alteram partem, as it entails significant civil consequences.

ORAL ORDER

The petitioners in the batch of these petitions call in question proceedings in C.C.No.6556/2023 pending on the file of XVII Additional Chief Metropolitan Magistrate, Bangalore registered for offences punishable under Sections 120B read with Sections 420 , 468, 471 and 477A of the Indian Penal Code, 1860 .

2. Heard Shri Bipin Hegde, learned counsel for Shri A.Mahesh Choudhary, learned counsel appearing for the petitioners and Shri P. Prasanna Kumar, learned counsel appearing for the respondents.

3. Facts in brief germane are as follows:

The accused No.1 - Opto Circuits (India) Private Limited (hereinafter referred to as a 'company' for short) was established in the year 1992. It is engaged in the business of manufacturing of invasive and non-invasive medical devices. Accused Nos.3 and 4 are partners of the firm. One Shri Vinod Ramani is the Director of accused No.1 - the company.

4. The company began Banking with respondent No.2 State Bank of India (hereinafter referred to as the 'Bank' for short) and obtained a business loan from their IFB branch, which stood approved up to 27.11.2009. Between 2009 to 2012, loan was enhanced by respondent No.2 and the working capital limit was increased to Rs.186/-crores. It appears that the company defaulted in repayment of loan at appropriate schedule. This led the Bank to initiate recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. Several notices were issued. The accounts of the company were declared to be a non performing asset by the Bank. The directors were removed from Board of Directors of the company. The Debt Recovery Tribunal passes a final order in the Original Appeal (O.A.) that was instituted by the Bank, recovery certificate was issued in favour of the Bank. Respondent No.2 issued a sale proclamation for the properties owned by the company.

5. When things stood thus, the Assistant General Manager of the Bank registered a complaint against the petitioners and the company alleging fraud, cheating and other offences committed by the company due to which a loss of Rs.354.32/-crores was projected. Based upon the said complaint, a crime comes to be registered by the CBI for the afore-quoted offences and the offences under the Prevention of Corruption Act, 1988 against the public servants. The allegation was that the petitioners along with unknown public servants had conspired to cheat the Bank causing a wrongful loss as aforesaid. The concerned Court transfers the case to the special judge for CBI cases and the matter was pending therein. The CBI after investigation filed their charge sheet. The charge sheet was clearly based upon the accounts of the petitioners becoming an NPA and being termed as a fraud or the petitioners being described as willful defaulters by the Bank. Two criminal petitions have sprung from the concerned Court taking cognizance and issuing summons against these petitioners. Two of them are tagged in these petitions.

6. One annulatus development takes place. The classification of the account of the company and the petitioners to be a fraud or the petitioners being willful defaulters was challenged before this Court in W.P.No.10213/2023. The writ petition comes to be disposed by a Co-ordinate Bench of this Court on 06.12.2024. The Co-ordinate Bench has held as follows:

"2. The petitioner is the borrower of loan from the respondent - Bank . The respondent asserting that the petitioners willfully defaulted on the repayment of the loan, classified the petitioner's account as ‘Fraudulent’ on 1.4.2019.

3. Sri. Kiran S. Jawali, learned Senior Counsel representing the petitioner, submitted that before classifying the petitione