Full Text
HIGH COURT OF DELHI
Date of Decision: 02.11.2023
BOOM AGRO INDIA PVT LTD & ANR. ..... Petitioner
Through: Mr. Shankari Mishra, Advocate.
Through: Mr. Ramesh Babu M. R., Mr. Manish Singh, Ms. Nisha Sharma and Mr. Rohan Srivastava, Advocates for
Respondent/ RBI.
Mr. Arun Aggarwal, Mr. Varun Bhatnagar and Ms. Madhu Yadav, Advocates for Respondents.
BOOM BUYING PVT LTD & ANR. ..... Petitioner
Through: Mr. Shankari Mishra, Advocate.
Through: Mr. Ramesh Babu M. R., Mr. Manish Singh, Ms. Nisha Sharma and Mr. Rohan Srivastava, Advocates for
Respondent/ RBI.
Mr. Arun Aggarwal, Mr. Varun Bhatnagar and Ms. Madhu Yadav, Advocates for Respondents.
HON'BLE MR. JUSTICE TUSHAR RAO GEDELA SATISH CHANDRA SHARMA, CJ. (ORAL)
JUDGMENT
1. At the outset, Learned Counsel for the Reserve Bank of India has stated before this Court that the issue involved in the present matter is already covered by a judgment delivered by the Hon’ble Supreme Court in Civil Appeal No. 7300/2022 titled State Bank of India & Others Vs. Rajesh Agarwal & Others.
2. The aforesaid judgement of the Hon’ble Supreme Court arose out of a challenge to the Reserve Bank of India (Frauds Classification and Reporting by Commercial Banks and Select Financial Institutions) Directions 2016 (hereinafter, ‘Master Directions on Frauds’) on grounds that it did not grant an opportunity of hearing to borrowers before classifying their accounts as fraudulent.
3. It was held by the Hon’ble Supreme Court that the principles of natural justice, particularly the rule of audi alteram partem, has to be necessarily read into the Master Directions on Frauds to save it from the vice of arbitrariness. It was so held that as the classification of an account as fraud entails serious civil consequences for the borrower, the directions must be construed reasonably by reading into them the requirement of observing the principles of natural justice. It was held that the administrative proceedings which entail significant civil consequences must be read consistent with the principles of natural justice to meet the requirement of Article 14. Where possible, the rule of audi alteram partem ought to be read into a statutory rule to render it compliant with the principles of equality and non-arbitrariness envisaged under Article 14. The Master Directions on Frauds did not expressly provide the borrowers an opportunity of being heard before classifying the borrower’s account as fraud. The Hon’ble Supreme Court, therefore, held that the principle of audi alteram partem must then be read into the provisions of the Master Directions on Frauds.
4. The relevant paragraphs of the judgement passed by the Hon’ble Supreme Court read as under:
5. In light of the aforesaid judgment passed by the Hon’ble Supreme Court, as no opportunity of hearing was granted to the Petitioners herein, the action of the Respondent No. 2 Bank in declaring the accounts of the Petitioners as ‘Fraud’ is hereby set aside. However, liberty is granted to the Respondent No. 2 Bank to proceed in accordance with law laid down in Rajesh Agarwal (supra).
6. It is made clear that this Court has not commented upon any criminal case/ FIR registered against either of the Petitioners, if any.
7. The Petitions stand disposed of in the aforesaid terms.
SATISH CHANDRA SHARMA, CJ TUSHAR RAO GEDELA, J NOVEMBER 2, 2023