Delhi High Court - Orders
Manish Jain vs Indian Bank on 10 July, 2025
$~126
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 9536/2025
MANISH JAIN .....Petitioner
Through: Ms. Purti Gupta, Ms. Henna George
and Ms. Pooja Aggarwal, Advs.
versus
INDIAN BANK .....Respondent
Through: Mr. Santosh Kumar Rout, Standing
Counsel with Ms. Dharna Veragi,
Adv.
CORAM:
HON'BLE MR. JUSTICE VIKAS MAHAJAN
ORDER
% 10.07.2025 CM APPL. 40248/2025 (exemption)
1. Allowed, subject to all just exceptions.
2. The application stands disposed of.
W.P.(C) 9536/2025 & CM APPL. 40247/2025 (by the petitioner under Section 151 CPC seeking interim relief)
3. The present petition has been filed assailing the impugned order dated 03.07.2025 issued by the respondent bank whereby account of the petitioner has been classified as 'fraud'.
4. Ms. Purti Gupta, learned counsel appearing on behalf of the petitioner submits that besides not providing the relevant documents, no personal hearing was afforded to the petitioner, before passing an impugned order.
5. She draws attention of the Court to the impugned order dated This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/07/2025 at 21:33:52 03.07.2025, to contend that the bank has taken a stand that in view of the decision in State Bank of India vs. Rajesh Agarwal & Ors., (2023) 6 SCC, that personal hearing is not required. Accordingly, no personal hearing was afforded despite specific request having been made by the petitioner in that behalf. The relevant part of the impugned order reads thus:
"The Show Cause Notices dated: 25.10.2023 issued, was delivered to all of them as per Registered Post Tracking Memo details. The Company and its Directors / Guarantors submitted their reply on 13.11.2023 against the SCN issued and requested for six weeks' timeline for detailed reply, asked documents on the basis of which FAR has been drawn up and asked to provide an opportunity of presenting the Case by Oral hearing through Advocate.
After providing suitable timeline as per the request of the borrowers, the matter was taken up with them and reminder letter was issued to the Company and its Directors / Guarantors on 02.08.2024 for submission of the reply on the fraud pointers as well as stating that all the documents on which the Bank is relying for declaring the notices as fraud has already been provided to them and Supreme Court vide its order dated 12.05.2023 had clarified that hearing does not mean personal hearing."
(Emphasis supplied)
6. Ms. Gupta has placed reliance on the decision of Hon'ble Supreme Court in State Bank of India vs. Rajesh Agarwal & Ors., (2023) 6 SCC 1 wherein the Court has laid down as under:
"55. Classification of the borrower's account as fraud under the Master Directions on Frauds virtually leads to a credit freeze for the borrower, who is debarred from raising finance from financial markets and capital markets. The bar from raising finances could be fatal for the borrower leading to its "civil death" in addition to the infraction of their rights under Article 19(1)(g) of the Constitution. Since debarring disentitles a person or entity from exercising their rights This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/07/2025 at 21:33:52 and/or privileges, it is elementary that the principles of natural justice should be made applicable and the person against whom an action of debarment is sought should be given an opportunity of being heard.
xxx xxx xxx
67. The Master Directions on Frauds do not expressly exclude a right of hearing to the borrowers before action to class their account as frauds is initiated. The principles of natural justice can be read into a statute or a notification where it is silent on granting an opportunity of a hearing to a party whose rights and interests are likely to be affected by the orders that may be passed.
xxx xxx xxx
E. Conclusion
98. The conclusions are summarised below:
98.1. No opportunity of being heard is required before an FIR is lodged and registered.
98.2. Classification of an account as fraud not only results in reporting the crime to the investigating agencies, but also has other penal and civil consequences against the borrowers.
98.3. 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.
98.4. 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 of hearing ought to be provided before a person is blacklisted.
98.5. 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.
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/07/2025 at 21:33:52 98.6. The principles of natural justice demand that the borrowers must be served a notice, given an opportunity to explain the conclusions of the forensic audit report, and be allowed to represent by the banks/JLF before their account is classified as fraud under the Master Directions on Frauds. In addition, the decision classifying the borrower's account as fraudulent must be made by a reasoned order. 98.7. Since the Master Directions on Frauds do not expressly provide an opportunity of hearing to the borrowers before classifying their account as fraud, audi alteram partem has to be read into the provisions of the directions to save them from the vice of arbitrariness.
99. In the result, the judgment of the Division Bench of the High Court of Telangana dated 10-12-2020 [Rajesh Agarwal v. RBI, 2020 SCC OnLine TS 2021] is upheld. The judgments of the High Court of Telangana dated 22-12-2021 [Shree Saraiwwalaa Agrr Refineries Ltd. v. Union of India, 2021 SCC OnLine TS 1816] and 31-12-2021 [Yashdeep Sharma v. RBI, 2021 SCC OnLine TS 1852] , and of the High Court of Gujarat dated 23-12-2021 [Mona Jignesh Acharya v. Bank of India, 2021 SCC OnLine Guj 2811] are accordingly set aside. The civil appeals are disposed of. Writ Petition (C) No. 138 of 2022 is also disposed of in the above terms. There shall be no order as to costs.
100. Pending application(s), if any, shall stand disposed of."
(emphasis supplied)
7. She further contends that the Division Bench of this Court in IDBI Bank Ltd vs. Gaurav Goel & Ors., 2025 SCC OnLine Del 935, has also clarified that Rajesh Agarwal (supra) lays down that granting of hearing which is mandatory before classifying account as 'fraud' would include personal hearing. The relevant paragraph from the said decision reads thus:
"19. Since, in paragraph 99, the Hon'ble Supreme Court has upheld the said decision of the Hon'ble High Court of Telangana (2020 SCC OnLine TS 2021), in our This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/07/2025 at 21:33:52 considered opinion, reading the conclusion in Rajesh Agarwal, (supra), as can be found in paragraph 98.4, to mean that in proceedings under the RBI Directions, opportunity of hearing would not include opportunity of personal hearing, is untenable. Once, the Hon'ble Supreme Court upheld the judgment of the Hon'ble High Court of Telangana which clearly had directed for providing an opportunity of personal hearing as well, to conclude that opportunity of hearing would not include opportunity of personal hearing, in our opinion, will be erroneous.
20. The submission made by learned counsel representing the appellant that the proceedings consequent upon the show cause notice under the RBI Directions are administrative proceedings as such the process of fair hearing will not be at the standard of a judicial proceeding, in our considered opinion, does not have any bearing to the instant case for the reason that the Hon'ble Supreme Court in Rajesh Agarwal, (supra) has clearly reiterated the well- known principle of law that even in administrative action, the principles of audi alteram partem are to be observed. The extent of application of the principle of audi alteram partem in the proceedings drawn under the RBI Directions has already been explained by the Hon'ble Supreme Court in Rajesh Agarwal, (supra) which has upheld the directions issued by the Hon'ble High Court of Telangana where one of the directions issued was for providing opportunity of personal hearing as well.
21. It is trite in law that there is no straight jacketed formula to ensure observance of principles of justice for the reason that the extent and width of application of this principle depends on the nature of proceedings and the provisions under which such proceedings are drawn as also on the consequences which such proceedings entail.
22. However, once the Hon'ble Supreme Court in Rajesh Agarwal, (supra) has clearly upheld the directions issued by the Hon'ble High Court of Telangana (2020 SCC OnLine TS 2021) regarding providing opportunity of This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/07/2025 at 21:33:52 personal hearing in the proceedings drawn under the RBI Directions, it is not open to this Court to read the application of principle of audi alteram partem in any other manner."
(emphasis supplied)
8. It thus, appears no personal hearing has been afforded to the petitioner before the account was classified as 'fraud'. Therefore, having regard to the law enunciated in the above referred judgments, this Court is of the view that prima facie case has been made out by the petitioner for granting of interim relief sought.
9. Accordingly, issue notice. Mr. Santosh Kumar Rout, learned Standing Counsel appearing on behalf of respondent bank accepts notice.
10. Let counter-affidavit be filed within a period of four weeks from today.
11. Rejoinder thereto, if any, be filed within two weeks thereafter.
12. Re-notify on 27.10.2025.
13. In the meanwhile, the operation of the impugned order is stayed till the next date.
VIKAS MAHAJAN, J JULY 10, 2025 aj This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 16/07/2025 at 21:33:52