Delhi High Court - Orders
Rajesh Galhotra & Ors vs Indian Bank on 29 May, 2025
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 17151/2024
RAJESH GALHOTRA & ORS. .....Petitioners
Through: Mr. Amit Sibal, Senior Advocate with
Ms. Neeha Nagpal, Mr. Malak Bhatt, Mr.
Vishvendra Tomar and Mr. Nikunj Mahajan,
Advocates.
versus
INDIAN BANK .....Respondent
Through: Mr. Santosh Kr. Rout, Standing
Counsel with Ms. Dharna Veragi, Ms. Sakshi Raj
and Ms. Shruti Tripathi, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIKAS MAHAJAN
ORDER
% 29.05.2025 CM APPL. 34622/2025
1. The present application has been filed by the applicants/petitioners praying for stay of the proceedings initiated by the respondent Bank pursuant to the show-cause notice dated 23.07.2024 including any action arising from the notice dated 23.05.2025 pertaining to classification of the account of the M/s. Noesis Industries Ltd. as 'Fraud' and all consequential proceedings thereto including declaration of fraud, if any.
2. The challenge in the main writ petition is inter alia to the show-cause notice dated 23.07.2024, issued by the respondent bank.
3. Mr. Amit Sibal, learned Senior Counsel appearing on behalf of the applicants/petitioners invites attention of the Court to the impugned show-
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 27/06/2025 at 23:27:11 cause notice to contend that the show-cause notice itself refers to the stock audit report of the company besides the forensic audit report. He submits that the stock audit report was not furnished to the petitioner along with the show-cause notice.
4. Insofar as the forensic audit report is concerned, the submission of Mr. Sibal is that the annexures to forensic audit report were never supplied to the petitioner. He draws attention of the Court to the letter dated 06.08.2024 written by the petitioner to the respondent Bank to contend that vide said letter, petitioner had asked for as many as 8 documents which have been enumerated in Para (iv) thereof.
5. A perusal of the said letter shows that apart from other documents, applicants/petitioners had specifically asked for copy of the stock audit report dated 31.12.2013; copy of the appraisal note of banks; copy of Loan sanction letters; copy of valuation of report of Ghanshyam Dass besides other documents.
6. Attention of the Court is also drawn to the order dated 12.12.2024 passed in this petition to contend that in the said order submission of learned counsel for the respondent Bank has been recorded to the effect that all documents have already been provided, but in the recent letter dated 23.05.2025 issued by the respondent/Indian Bank, stand taken by the Bank is that documents sought are not relevant to the fraud pointers, and the charges as mentioned in the show-cause notice.
7. Mr. Sibal submits that it is obligatory on the part of the respondent Bank not only to disclose and supply copy of the documents which have been referred to in the show-cause notice, but other documents, which are otherwise relevant to the controversy.
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8. In support of his submission, Mr Sibal places reliance on the decision of the Supreme Court in T. Takano v. Scurity and Exchange Board of India and Another, (2022) 8 SCC 162, more particularly Para 29 and 30 thereof, which reads thus:
"29. The purpose of disclosure of information is not merely individualistic, that is to prevent errors in the verdict but is also towards fulfilling the larger institutional purpose of fair trial and transparency. Since the purpose of disclosure of information targets both the outcome (reliability) and the process (fair trial and transparency), it would be insufficient if only the material relied on is disclosed. Such a rule of disclosure, only holds nexus to the outcome and not the process. Therefore, as a default rule, all relevant material must be disclosed.
30. It would be fundamentally contrary to the principles of natural justice if the relevant part of the investigation report which pertains to the appellant is not disclosed. The appellant has to be given a reasonable opportunity of hearing. The requirement of a reasonable opportunity would postulate that such material which has been and has to be taken into account under Regulation 10 must be disclosed to the noticee. If the report of the investigating authority under Regulation 9 has to be considered by the Board before satisfaction is arrived at on a possible violation of the regulations, the principles of natural justice require due disclosure of the report."
(emphasis supplied)
9. Reliance is also placed by Mr. Sibal on the decision of Division Bench of the High Court of Bombay in Milind Patel v. Union Bank of India and Others, 2024 SCC OnLine Bom 745. Relevant paragraphs on which emphasis has been laid down by Mr. Sibal reads thus:
"25. A plain reading of Takano [T. Takano v. Securities and Exchange Board of India, (2022) 232 Comp Cas 136 (SC); (2022) 8 SCC 162; (2022) 3 SCC (Cri) 306; (2022) 4 SCC (Civ) 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 27/06/2025 at 23:27:11
248.] would throw light on how the Master Circular must be construed. The Master Circular consciously enables inflicting "penal" consequences, and underlines the "imperative" need to adhere to a "transparent mechanism". The avoidance of information asymmetry and the means of ensuring transparency as outlined by the hon'ble Supreme Court in Takano [T. Takano v. Securities and Exchange Board of India, (2022) 8 SCC 162 would necessarily mean that principles of natural justice, including the need to provide the underlying material, are inherent and implicit in the process stipulated under the Master Circular. The material and information in question for disclosure to the noticee would be all "relevant" material and not just information that is "relied upon" or "referred to" in the show-cause notice.
26. Not only must information that is referred to and relied on in the show-cause notice be supplied but also information that may undermine the allegations contained in the show-cause notice (which may therefore not be referred to or relied on) must be supplied only to ensure that everything relevant to arrive at the truth is available to both parties. The objective of the proceedings initiated by issuance of a show-cause notice is not to somehow find the noticee guilty of wilful default on the same terms as alleged. Instead, the objective is to arrive at the truth as to whether or not an individual in question is to be subjected to "penal" (in the Reserve Bank of India's words) consequences.
Therefore, if the bank has conducted a forensic investigation into alleged diversion and siphoning off of funds, and specific roles played by specific individuals is brought out in the investigation, and such a probe would point to plausible interpretation that certain individuals did not play any role in the diversion and siphoning, the material underlying such plausible inference would undermine the allegations. Therefore, fair and transparent symmetrical access to information, as stipulated by the hon'ble Supreme Court in Takano would mean providing access to not only incriminating material but also 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 27/06/2025 at 23:27:11 exculpatory material, since all such information would be relevant for arriving at the truth. Therefore, access to the record is a vital element of complying with principles of natural justice. In the instant case, not only has no material been supplied, but also Union Bank has actually asserted on oath that it was not required to provide any material whatsoever, and that it is for the noticee to prove his innocence."
(emphasis supplied)
10. Further, Mr. Sibal has also relied upon the decision of the Coordinate Bench of this Court dated 22.05.2024 passed in W.P.(C) 1730/2024 titled as Shantanu Prakash v. State Bank of India and Ors., wherein this Court relying upon the decision of T. Takano (supra) has observed that it is imperative that the relevant documents that form basis of issuance of show- cause notice, ought to be provided to the concerned party in order to enable such a party to raise its defence effectively. Relevant Para of the said decision reads thus:
"11. In view of the aforesaid, it is imperative that the relevant documents that form the basis of issuance of a SCN, ought to be provided to the concerned party in order to enable such a party to raise its defense effectively. Such fundamental right of a party cannot be taken away by denying a proper opportunity to submit an efficacious reply, which would not be feasible in the absence of requisite documents that form the core foundation of a SCN. This assumes all the more importance, as on the basis of the defense raised by such a party, proceedings thereto, against the said party, may be dropped in appropriate cases."
11. In view of the above, issue notice.
12. Mr. Santosh Kumar Rout, learned counsel appearing on behalf of respondent/Bank accepts notice. He refers to Annexure P-4 at Page 62 of the petition to contend that vide letter dated 19.11.2024, respondent Bank 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 27/06/2025 at 23:27:11 had informed erstwhile Chairman of the Company that all the documents sought for have already been provided.
13. He also refers to the order dated 18.10.2024 passed in W.P.(Crl.) 2938/2024 titled as Rajesh Galhotra and Ors. v. CBI and Anr., which was a petition filed by the same petitioner, to contend that learned Senior Counsel who appeared on behalf of the petitioners, had referred to the forensic audit report which suggests that forensic audit report was supplied to the petitioners herein.
14. However, on being queried by the Court, Mr. Rout is not able to show any document which would establish that the documents enumerated in petitioners' letter dated 06.08.2024 (Annexure P-2) as well as in Para 8 of the present application, were furnished to the present petitioners.
15. Let reply to the application be filed within a period of four weeks. Rejoinder thereto be filed within two weeks thereafter.
16. In the meanwhile having regard to the submissions made by Mr. Sibal, which prima facie appears to have substance, the proceedings emanating from the impugned show-cause notice shall remain stayed till the next date of hearing.
17. In the meanwhile, respondent Bank is at liberty to furnish all the relevant documents to the petitioners, or else file the record with its counter- affidavits suggesting that all the relevant documents have already been furnished.
18. List on 16.09.2025, the date already fixed.
VIKAS MAHAJAN, J MAY 29, 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 27/06/2025 at 23:27:11