Delhi High Court - Orders
Dinesh Kumar vs Union Bank Of India & Anr on 9 July, 2025
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 5473/2025 and CM APPL. Nos. 24939/2025
DINESH KUMAR .....Petitioner
Through: Mr. Siddharth Chopra, Mr. Navneet
and Mr. Aditya Awasthi, Advocates.
versus
UNION BANK OF INDIA & ANR. .....Respondents
Through: Mr. Santosh Kumar Rout, Standing
Counsel with Ms. Dharna Veragi and Mr. Aditya,
Advocates for R1.
CORAM:
HON'BLE MR. JUSTICE VIKAS MAHAJAN
ORDER
% 09.07.2025 CM APPL. 24940/2025
1. Allowed, subject to all just exceptions.
2. Application stands disposed of.
W.P.(C) 5473/2025
3. The present petition has been filed by the petitioner seeking following reliefs:
"a. Issue a Writ of mandamus, certiorari or any other appropriate Writ in the nature of mandamus, Certiorari etc. for quashing/ setting aside of the Show Cause Notice dated 18.11.2024 issued by the Respondent No. 1 as well as the consequent Impugned proceedings and the Letter dated 03.01.2025 and Order dated 25.02.2025 passed by the Respondent No. 1 thereby classified the Petitioner 'fraud' and all the consequential proceedings emanating therefrom. b. Issue a writ of Mandamus or any other appropriate writ, Order, or direction in the nature thereof, restraining the Respondent Bank from reporting the names of the Petitioner to This is a digitally signed order.
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OR In the alternative, assuming that the Respondent" Bank has already reported the names of the Petitioners to the Reserve Bank of India, issue a writ of Mandamus or any other appropriate writ, order, or direction in the nature thereof directing the Respondent to cause deletion of their names from the list of 'Fraud' maintained by the Reserve Bank of India and any other third party, as the case may be;
c. Issue a writ of Mandamus or any other appropriate writ, order, or direction in the nature thereof, restraining the Respondent No. 1 from publishing the names of the Petitioner and/ or their photographs as 'Fraud' on its website or otherwise on public domain.
OR d. In the alternative, assuming that the Respondent has already done so, to issue a writ of Mandamus or any other appropriate writ, order, or direction in the nature thereof, directing the Respondent N. 1 to delete the names of the Petitioner and/ or their photographs as 'Fraud' from their website and public domain and to ensure publication of corrective statements withdrawing any such publication already made."
4. The learned counsel appearing on behalf of the petitioner submits that petitioner has been classified as fraud without affording any personal hearing. He submits that show-cause notice dated 18.11.2024 was responded to by petitioner vide reply dated 17.12.2024 in which a specific request was made by the petitioner for granting personal hearing. He also refers to the letter of the Bank dated 03.01.2025 to contend that the said request has been specifically rejected by the Bank by stating that no personal hearing can be provided other than the written justification submitted by petitioner.
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5. The learned counsel for the petitioner also relies upon the decision of the Hon'ble Supreme Court in State Bank of India v. Rajesh Aggarwal and Ors., (2023) 6 SCC 1 wherein the Hon'ble Supreme Court has observed 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 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 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 14/07/2025 at 21:54:08 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.
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.
This is a digitally signed order.
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100. Pending application(s), if any, shall stand disposed of."
(emphasis supplied)
6. He also refers to a decision of the Division Bench of this Court in IDBI Bank v. Gaurav Goel & Ors, 2025 SCC OnLine Del 935, in which the Hon'ble Division Bench has clarified that in Rajesh Aggarwal (supra), the Hon'ble Supreme Court has clearly laid down that the opportunity of hearing would include opportunity of personal hearing. The relevant paragraphs of the said decision read as under:
"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 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 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 14/07/2025 at 21:54:08 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 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)
7. In view of the above, issue notice.
8. Mr. Santosh Kumar Rout, learned appearing on behalf of respondent /UBI accepts notice. Let counter-affidavit be filed within a period of four weeks. Rejoinder thereto be filed within two weeks thereafter.
9. In the meanwhile, having regard to the submissions made by the learned counsel for the petitioner, which prima facie appears to have substance, the operation of the impugned order dated 25.02.2025 is stayed.
10. List on 30.10.2025.
VIKAS MAHAJAN, J JULY 9, 2025/jg 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 14/07/2025 at 21:54:08