ANI
28 Mar 2023, 04:27 GMT+10
New Delhi [India], March 27 (ANI): The Supreme Court on Monday rejected the State Bank of India's appeal, upholding the Telangana High Court's order and ruled that it is reasonably practicable for the lender banks to provide an opportunity for a hearing to the borrowers before classifying their accounts as fraud.
A bench of Chief Justice Dhananjaya Y Chandrachud and justice Hima Kohli uphold the judgment of the Division Bench of the High Court of Telangana dated December 10, 2020. The court set aside the judgments of the High Court of Telangana dated December 22, 2021 and December 31, 2021, and of the High Court of Gujarat dated December 23, 2021.
The top court said that the principles of natural justice demand that the borrowers must be served notice, given an opportunity to explain the conclusions of the forensic audit report, and be allowed to represent by the banks before their account is classified as fraud.
In addition, the decision classifying the borrower's account as fraudulent must be made by reasoned order, the court held.
"The application of audi alteram partem cannot be impliedly excluded under the Master Directions on Frauds. In view of the time frame contemplated under the Master Directions on Frauds as well as the nature of the procedure adopted, it is reasonably practicable for the lender banks to provide an opportunity of a hearing to the borrowers before classifying their account as fraud," the court said.
Classification of an account as a fraud not only results in reporting the crime to investigative agencies but also has other penal and civil consequences against the borrowers, the apex court said.
The court said that debarring the borrowers from accessing institutional finance under Clause 8.12.1 of the Master Directions on Frauds results in serious civil consequences for the borrower.
The court said that such a debarment under Clause 8.12.1 of the Master Directions on Frauds is akin to blacklisting the borrowers for being untrustworthy and unworthy of credit by banks. This Court has consistently held that an opportunity for a hearing ought to be provided before a person is blacklisted.
The court was hearing the civil appeals arising out of a challenge to the Reserve Bank of India (Frauds Classification and Reporting by Commercial Banks and Select FIs) Directions 2016. These directions were challenged before different High Courts primarily on the ground that no opportunity of being heard is envisaged by borrowers before classifying their accounts as fraudulent.
The High Court of Telangana has held in the impugned judgment that the principles of natural justice must be read into the provisions of the Master Directions on Frauds. The decision has been assailed by the RBI and lender banks through these civil appeals. (ANI)
Get a daily dose of Philadelphia Herald news through our daily email, its complimentary and keeps you fully up to date with world and business news as well.
Publish news of your business, community or sports group, personnel appointments, major event and more by submitting a news release to Philadelphia Herald.
More InformationNEW YORK, New York - U.S. stocks moved higher Thursday as investors and traders took a break from their recent ...
LISBON, Portugal: Carsten Spohr, Chief Executive of Lufthansa, has said that as Portugal's government is still debating whether to sell ...
NEW YORK, New York - U.S. stocks were divided on Wednesday, with the technology and industrial sectors parting ways.Tech stocks ...
HOLLYWOOD, California: More than tripling the debut of its 2018 animated original predecessor, Sony Pictures' "Spider-Man: Across the Spider-Verse" opened ...
PARIS, France: European plane manufacturer Airbus is reported to be close to a record agreement to sell 500 narrow-body jets ...
TRAVERSE CITY, Michigan: DuPont, Chemours and Corteva have reached an agreement to pay $1.18 billion to resolve complaints of causing ...
PORTLAND, Oregon: A federal trial has begun in Portland, Oregon examining the constitutionality of a stringent gun control law approved ...
PHILADELPHIA, Pennsylvania: Philadelphia Mayor Jim Kenney and members of the city's historical commission have been sued by a group which ...
LANSING, Michigan: Michigan's Department of Natural Resources said by a wildfire in the state has burned through more than 3 ...
ISTANBUL, Turkey: In an interview with Reuters, Willie Walsh, director-general of the International Air Transport Association, (IATA), said airlines are ...
SACRAMENTO, California: Sixteen migrants from Venezuela and Colombia, who had entered the United States through Texas, were transported to California ...
GRAND ISLE STATE PARK, Louisiana: Almost two years after Hurricane Ida struck the barrier island and destroyed most of its ...