Delhi High Court - Orders
Sh. Lagadapati Madhusudhan Rao vs Punjab National Bank on 22 January, 2024
$~78
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 928/2024 & CM APPL. 3838-3839/2024
SH. LAGADAPATI MADHUSUDHAN RAO ..... Petitioner
Through: Mr. Dayan Krishnan, Sr. Advocate
with Mr. Malak Bhatt, Ms. Neena
Nagpal, Mr. Mandeep Singh and Mr.
Sukrit Seth, Advocates.
versus
PUNJAB NATIONAL BANK ..... Respondent
Through: Mr. Santosh Kumar, Advocate for R-
1, 6 & 7.
Ms. Sreeparna Basak and Ms.
Pratyusha Preyadarshini, Advocate
for R-4. (Mob: 9313350637)
CORAM:
HON'BLE MS. JUSTICE MINI PUSHKARNA
ORDER
% 22.01.2024 CM APPL. 3839/2024 (for Exemption)
1. Exemption allowed, subject to just exceptions.
2. Application is disposed of.
W.P.(C) 928/2024 & CM APPL. 3838/2024
3. The present petition has been filed seeking direction for quashing and setting aside the Show Cause Notices dated 5th September, 2023, 4th October 2023, 7th October, 2023, 6th November, 2023, 8th November, 2023, 21st November, 2023 and 5th January, 2024 issued by the ICICI Bank, J&K 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 29/01/2024 at 20:43:41 Bank, Canara Bank, State Bank of India, Bank of Baroda, Punjab National Bank and Central Bank of India respectively.
4. The said Show Cause Notices have been issued to the petitioner for classification of the petitioner's account by the respondent banks as "fraud". It is submitted that the Show Cause Notices by the respondent banks are an empty formality since the requisite documents have not been issued to the petitioner.
5. It is submitted that the respondent banks continue to be in violation of the Principles of Natural Justice as the banks have till date neither provided the Transactional Audit Report nor the Final Forensic Audit Report of November 2019 along with the annexures, though they are relying on the same for raising various allegations against the petitioner.
6. It is submitted that the petitioners have been unable to make any effective representation before the respondent banks, as the respondent banks are not willing to provide the requisite documents to the petitioners. If the requisite documents are provided to the petitioners, only then the petitioners will be able to make out their defense and utilize the opportunity of making a representation to the respondent banks.
7. Learned Senior Counsel appearing for the petitioner has drawn the attention of this Court to the Show Cause Notice dated 5th September, 2023 issued by the ICICI Bank. By referring to the said Show Cause Notice, it is submitted that the said notice clearly records that various issues/anomalies were identified by the Bank based on the findings of Forensic Audit Report dated 14th November, 2019 issued by Grant Thomton India LLP and opinion on Forensic Audit Report dated 13th August, 2020 issued by MDP Partners.
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 29/01/2024 at 20:43:41
8. Learned senior counsel has also drawn the attention of this Court to the letter dated 15th September, 2023 issued by the petitioner to the ICICI Bank Ltd., where in Para 12 of the said letter various documents have been detailed, which are required by the petitioner for the purposes of submitting an effective reply to the Show Cause Notice issued to him.
9. Learned counsel has also relied upon the judgment in the case of State Bank of India and Others Versus Rajesh Agarwal and Others, 2023 SCC OnLine SC 342, to submit that the opportunity of Audi Alteram Partem entails that the entity against whom evidence is collected, must be provided an opportunity to explain the evidence against it. Learned senior counsel relies upon Para 71 of the aforesaid Judgment, which reads as under:
"xxx xxx xxx
71. As a counter to the above legal position, RBI and lender banks have contended that the principles of natural justice could be excluded in cases where there is a requirement of promptitude or exigent action. In support of the submission, RBI and banks have relied upon Ajit Kumar Nag v. Indian Oil Corpn. Ltd. [Ajit Kumar Nag v. Indian Oil Corpn. Ltd., (2005) 7 SCC 764 : 2005 SCC (L&S) 1020] , which in turn relied on the Constitution Bench decision of this Court in Union of India v. Tulsiram Patel [Union of India v. Tulsiram Patel, (1985) 3 SCC 398 : 1985 SCC (L&S) 672] . In Tulsiram Patel [Union of India v. Tulsiram Patel, (1985) 3 SCC 398 : 1985 SCC (L&S) 672] , this Court observed that a right to a prior notice and an opportunity to be heard could be excluded if allowing for such a right would obstruct the taking of prompt action : (Tulsiram Patel case [Union of India v. Tulsiram Patel, (1985) 3 SCC 398 : 1985 SCC (L&S) 672] , SCC p. 479, para 101) "101. ... So far as the audi alteram partem rule is concerned, both in England and in India, it is well established that where a right to a prior notice and an opportunity to be heard before an order is passed would obstruct the taking of prompt action, such a right can be excluded. This right can also be excluded where the nature of the action to be taken, its object and purpose and the scheme of the relevant statutory provisions warrant its exclusion; nor can the audi alteram partem rule be 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 29/01/2024 at 20:43:41 invoked if importing it would have the effect of paralysing the administrative process or where the need for promptitude or the urgency of taking action so demands, ..."
xxx xxx xxx"
10. Thus, it is submitted that the evidence on the basis of which the Show Cause Notices have been issued by the various banks, ought to be provided to the petitioner. Otherwise, in the absence of the said documents, the opportunity provided to the petitioner will remain an empty formality.
11. Learned Senior Counsel has also relied upon the judgment in the case of Indian Commodity Exchange Limited Versus Neptune Overseas Limited And Others, 2020 SCC OnLine SC 967, in particular to paragraphs 32, 33 and 34, which read as under:
"xxx xxx xxx
32. We have no doubt that a proper show-cause notice was served on Respondent 2 herein. The moot point, however, remains as to what is the effect of not serving him with the documents he sought for and within the compass of time, which was given to him to respond.
33. Once again, it may be stated that a large part of the documents would have been within the custody of Respondent 2 herein or for that matter with Respondent 1 herein. However, this would not encompass all the documents. Not only that, when reliance is placed on as many as 4000 pages of documents, it would not be fair to expect that the party in question ferrets through its own record trying to locate the documents, when on basis of formation of an opinion for issuance of the show-cause notice, logic and requirement of law both would dictate that the show-cause notice should be comprehensive enough with full supporting documents being handed over. The answer cannot be that they are free to inspect 4000 pages on their own! In fact, in so many terms, ultimately most of those documents were made available and it would not be appropriate to go back into the issue of whether the documents should have been supplied or not. In a sense, that chapter closed with the supply of documents on 5-7-2011 even though some more documents were sought thereafter.
34. We fail to appreciate why there should have been a cussedness in handing over mere copies of documents when serious allegations and 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 29/01/2024 at 20:43:42 serious consequences which would flow to the respondents herein. Not only that, the endeavour to conclude the proceedings within a span of two weeks thereafter cannot, in our view, be said to be an adequate opportunity as has been found by SAT. An opportunity of hearing is not a mere nicety but a valuable right. That it does not fall in a straitjacket formula is no doubt the accepted legal position (Dharampal Satyapal Ltd. [Dharampal Satyapal Ltd. v. CCE, (2015) 8 SCC 519] ). The question is whether there was substantial compliance of the principles of natural justice (Board of Mining Examination [Board of Mining Examination v. Ramjee, (1977) 2 SCC 256 : 1977 SCC (L&S) 226] ) and whether there were unnecessary adjournments being sought, which were declined. (Titaghur Paper Mills Co. Ltd. [Titaghur Paper Mills Co. Ltd. v. State of Orissa, (1983) 2 SCC 433 : 1983 SCC (Tax) 131] and Cement Workers Karamchari Sangh [Cement Workers Karamchari Sangh v. Jaipur Udyog Ltd., (2008) 4 SCC 701 : (2008) 2 SCC (L&S) 35] .) xxx xxx xxx"
12. By reference to the aforesaid judgment, it is submitted that the documents which are relied upon by the respondents, ought to be provided to the petitioner, as opportunity of hearing is a valuable right and is not merely a formality.
13. Learned Senior Counsel has also handed over copy of letter dated 9th January, 2024 issued by the respondent no. 1-Punjab National Bank ("PNB"), which was received by the petitioner on 18th January, 2024. In the said letter, PNB has categorically stated that the documents which the petitioner has requested for, are in the possession of IDBI Bank, which is the lead bank of the consortium banks. The letter dated 9th January, 2024 issued by the PNB to the petitioner reads as under:
"Punjab National Bank CIRCLE SASTRA Centre, Gurugram (D No. 823000), Plot no. 5, Institutional Area, Sector-32, Gurugram EMAIL: [email protected] To Dated: 09.01.2024 Mr. L Madhusudhan Rao Mr. L Madhusudhan Rao 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 29/01/2024 at 20:43:42 B-11, Pushpanjali Farms, Flat No. 103, Plot No. 132, Bijwasan, New Delhi-110061 Sai Krishna Residency, Phase-II Kavuri Hills, Madhapur, Hyderabad-500081 Smt. L Ramalakshmamma, Smt. L Ramalakshmamma B-11, Pushpanjali Farms, 8-21-9/1, 3rd line, Seetheramnagar, Bijwasan, New Delhi-110061 Mangalgiri Road, Kothapeta, Guntur, Andhra Pradesh-522001 Mr. Sridhar Lagadapati Mr. Bhaskara Rao Galapati Plot No. 1155, Road No. 54, Plot No. 150 Road No. 10 Jubilee Jubilee Hills, Hills Hyderabad-500033 Hyderabad 500033 Andhra Pradesh Mr. Gangarap Venkatesh Babu Mr. Gangarap Venkatesh Babu 35-A1, Prithviraj Road, 35-A1, Prithviraj Road, New Delhi-110003 New Delhi-110003 Mr. Sarat Chander Manocha Mr. Krotthapalli Raja Gopal, 2537, Sector C2, Vasant Kunj, S-318, Panchsheel Park, New Delhi-110070 New Delhi-110017 Sir/Madam Reg: Identification of default in the loan account of M/s Lanco Infratech Limited with the Bank, as 'Fraud' With reference to your replies to our notice dated 21.11.2023 regarding the Identification of fraud in the NPA A/c M/s LANCO Infratech Ltd, we are attaching herewith the GT Supplementary FAR dated 14.11.2019 as requested by you.
The forensic Audit was conducted on the directions of the RP/Liquidator appointed by Hon'ble NCLT and the reports, based on which the notices were issued, were prepared after necessary discussion with the authorized officers of the company.
Further, all other documents which were requested by you mainly pertaining to CDR and communications between LITL and various banks. Those documents are in possession with the IDBI Bank/Security Trustee. You are requested to directly take-up the matter with them. However, if anything pertaining to PNB is required the same shall be provided in due course.
The Final opportunity of hearing will be given to you by the competent authority before taking the final decision. Yours Faithfully 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 29/01/2024 at 20:43:42 For Punjab National Bank Bhupinder Saini CIRCLE SASTRA HEAD Encls: Copy of the forensic Audit report dtd. 13.09.2019, 14.11.2019"
14. Thus, it is submitted that the various documents ought to be provided to the petitioner, before a substantive reply can be submitted by the petitioner to the various Show Cause Notices issued by the respective banks.
15. Per contra, learned counsel appearing for the respondent no. 1-PNB submits that the bank has no objection to providing all the documents to the petitioner as per the Reserve Bank of India ("RBI") guidelines. He further submits that along with the letter dated 9th January, 2024, copy of the Forensic Audit Report dated 13th September, 2019 and 14th November, 2019, have already been provided to the petitioner. He submits that the other documents required by the petitioner can be obtained by the petitioner from IDBI Bank.
16. Learned counsel appearing for respondent no. 4-ICICI Bank submits that she has not received any instructions for the time being, with respect to the stage of the proceedings pending against the petitioner.
17. The matter requires consideration.
18. In view thereof, issue notice.
19. Notice is accepted by learned counsels appearing for respondent nos. 1, 4, 6 & 7.
20. Let notices be issued to the other respondents.
21. Considering the submissions made by learned counsel appearing for respondent no. 1 and the reply of the respondent no. 1-PNB in its letter dated 9th January, 2024, liberty is granted to the petitioner to approach the IDBI 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 29/01/2024 at 20:43:42 Bank within a period of two working days, and request the IDBI Bank to provide all the requisite documents, including the bank specific documents. The IDBI Bank is directed to supply the requisite documents to the petitioner in accordance with law and as per the prevalent banking norms. Upon receipt of such request from the petitioner, the IDBI bank is directed to ensure that all the requisite documents in its possession are supplied to the petitioner at the earliest.
22. Upon receipt of the requisite documents by the petitioner from the IDBI Bank, which shall also include the banks specific documents as required by the petitioner, within two weeks thereafter, the petitioner shall file a supplementary reply to the respective Show Cause Notices on the basis of the documents. After receipt of the supplementary reply from the petitioner, the respondent banks would be at liberty to proceed with further action under the respective Show Cause Notices, in accordance with law.
23. At this stage, learned Senior Counsel for the petitioner submits that since the IDBI Bank which is the lead bank of the consortium, though it has not issued any notice to the petitioner, would be a necessary party so that the Court can monitor the aspect of supply of requisite documents to the petitioner.
24. At oral request of the petitioner, IDBI Bank is impleaded as respondent no. 8.
25. Let notice be issued to the newly impleaded respondent no. 8.
26. Amended memo of parties be filed within a period of two weeks.
27. Till the next date of hearing, status quo shall be maintained with respect to the proceedings on the basis of the respective Show Cause Notices issued by the banks.
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 29/01/2024 at 20:43:42
28. Re-notify on 9th February, 2024.
MINI PUSHKARNA, J JANUARY 22, 2024 ak 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 29/01/2024 at 20:43:42