NEUTRAL CITATION NO.
2024:MPHC-IND:27687
W.P. No.29580 of 2023
IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE SUBODH ABHYANKAR
ON THE 24th OF APRIL, 2024
WRIT PETITION No. 29580 of 2023
BETWEEN:-
RAJIV SONI S/O LATE SHRI JANAKRAJ SONI,
AGED ABOUT 67 YEARS, OCCUPATION:
NOTHING 19/2 MANORAMA GANJ (MADHYA
PRADESH)
.....PETITIONER
(BY SHRI R. S. CHHABRA - SENIOR ADVOCATE WITH SHRI AMAN
ARORA, ADVOCATE)
AND
1. BANK OF INDIA THROUGH ITS BRANCH
HEAD BRANCH MANAGER BRANCH STAR
HOUSE 9/R.C.SCHEME NO.134, MR10
INDORE (MADHYA PRADESH)
2. ICICI BANK THROUGH ITS CHAIRMAN
AND BRANCH MANAGER BRANCH MALAV
PARISAR, INDORE (MADHYA PRADESH)
3. STATE BANK OF INDIA REGIONAL
BUSINESS OFFICE-2 5 YASHWANT NIWAS
ROAD INDORE (MADHYA PRADESH)
4. RESERVE BANK OF INDIA THROUGH ITS
GOVERNOR CENTRAL OFFICE BUILDING,
18TH FLOOR, SHAHID BHAGAT SINGH
ROAD MUMBAI (MAHARASHTRA)
.....RESPONDENTS
(BY SHRI ARPIT GURU – ADVOCAET FOR RESPONDENT NO.1; SHRI
Signature Not Verified
Signed by: PANKAJ
PANDEY
Signing time: 20-09-2024
16:57:02
NEUTRAL CITATION NO. 2024:MPHC-IND:27687
W.P. No.29580 of 2023
SANJAY PATHAK – ADVOCAET FOR THE RESPONDENT NO.2 AND
SHRI RAMESH CHANDRA SINHAL – ADVOCATE FOR RESPONDENT
NO.3).
……………………………………………………………………………………
This petition coming on for admission this day, the court passed
the following:
ORDER
1] Heard finally, with the consent of the parties.
2] This petition has been filed by the petitioner under Article
226 of the Constitution of India seeking the following reliefs:-
“A. Issue a Writ, Order or Direction in the nature of a
Mandamus or any other appropriate Writ, Order or
Direction directing the Respondent No 1 to 3 to provide
copies of the documents/ records including minutes of
meeting of Joint Lenders Forum and decisions
pertaining to decision of initiating Forensic Audit of
M/s Metalman Industries Private Limited to the
Petitioner; AND
B. Pass a Writ, Order or direction in the nature of a
mandamus or any other appropriate Writ, Order or
direction directing the Respondent No 1 to 3 to provide
a copy of the Forensic Audit Report conducted at the
behest of Respondent No. 1, 2 and 3 to the Petitioner
along with all its Annexure [if any]; AND
C. Pass a Writ, Order or direction in the nature of a
certiorari or any other appropriate Writ, Order or
direction quashing and setting aside the Forensic Audit
Report conducted at the behest of Respondent No.1 to
3;AND/OR
D. Issue Writ, Order or Direction in the nature of a
Certiorari or any other appropriate Writ, Order or
Direction quashing and setting aside the RBI Master
Directions on Frauds – Classification and Reporting by
commercial banks and FI’s dated 01.07.2016 (as
updated from time to time) bearing no DBS.CO.
CFMC.BC.No. 1/23.04.001/2016-17; AND
E. Issue a Writ, Order or Direction in the nature of a
Certiorari or any other appropriate Writ, Order or
Direction quashing and setting aside “the declaration of
Signature Not Verified
Signed by: PANKAJ
PANDEY
Signing time: 20-09-2024
16:57:02
NEUTRAL CITATION NO. 2024:MPHC-IND:27687
W.P. No.29580 of 2023
Fraud by the Respondent No.1, 2 and 3 against /
impacting the Petitioner incapacity of Director / Ex-
Director of M/s Metalman Industries Private Limited
and all consequential actions taken thereon; AND
F. Issue a Writ, Order or Direction in the nature of a
Certiorari or any other appropriate Writ, Order or
Direction quashing and setting aside the criminal
complaints submitted by the Respondent no.1,2 & 3
before EOW/CBI.
G. Pass any other order this Hon'ble Court may deem fit
and necessary; in the interest of justice and good faith.”
3] The petitioner is aggrieved by the action on the part of the
respondent Nos.1 to 3, with regard to the declaration of the
Company Metalman Industries Limited as fraud, since the
petitioner is an Ex-director of the said Company as he was the
director in the said company from 1971 to 2018. The grievance of
the petitioner is that the company Metalman Industries Limited
has been proceeded against by the banks in respect of the money
which was borrowed by the company, and the respondents/banks
have already declared the company as fraud. The respondent No.1
Bank of India has declared the company as fraud vide their
communication dated 28.09.2023, respondent No.2 ICICI Bank
vide their communication dated 05.12.2017 and respondent No.3
State Bank of India orally informed that the company has been
declared as fraud.
4] Senior counsel for the petitioner, at the outset, has drawn
the attention of this Court to the decisions already rendered by the
Division Bench of this Court in which it has already been held
that no such action can be taken against the persons by the banks
of declaring them as fraud without affording opportunity of
Signature Not Verified
Signed by: PANKAJ
PANDEY
Signing time: 20-09-2024
16:57:02
NEUTRAL CITATION NO. 2024:MPHC-IND:27687
W.P. No.29580 of 2023
hearing. Senior counsel has drawn the attention of this Court to
the order dated 25.07.2023 passed in W.P. No.23800 of 2021
(Surendra Patwa & Anr. Vs. Reserve Bank of India & Ors.) as
also the order passed in W.P. No.22760 of 2023 (Rajiv Soni Vs.
ICICI Bank & Anr. ) dated 08.09.2023 wherein this Court has
relied upon the decision rendered by the Supreme Court in the
case of State Bank of India & Ors. Vs. Rajesh Agrawal & Ors.
reported as (2023) 6 SCC 1. Thus, it is submitted that the action
which may culminate into lodging of the FIR against the
petitioner, may be quashed in the light of the aforesaid decisions
as the respondents would have the opportunity to initiate action
only after giving due opportunity of hearing to the petitioner.
5] Replies have also been filed by the respondent Nos.2 and 3,
however, counsel for the respondent No.1 Bank of India has
sought time to file the reply. However, he has not denied that the
orders passed by this Court in the aforesaid writ petitions have
attained the finality.
6] Counsel appearing for the respondent No.3 Shri R.C.
Sinhal, has submitted that for lodging the FIR, there is no
requirement of giving any opportunity of hearing to any person.
Thus, the petition is liable to be dismissed.
7] In rebuttal, Senior counsel for the petitioner has submitted
that in the writ petitions, in which the aforesaid orders, on which
the petitioner is relying upon, have been passed, Shri Sinhal had
also appeared for the Bank and thus, the orders are binding on the
Signature Not Verified
Signed by: PANKAJ
PANDEY
Signing time: 20-09-2024
16:57:02
NEUTRAL CITATION NO. 2024:MPHC-IND:27687
W.P. No.29580 of 2023
State Bank of India also.
8] Heard. Having considered the rival submissions, perusal of
the documents filed on record, it apparent that the respondents
have already declared the company Metalman Industries Limited
as fraud, of which the petitioner is an Ex-director, however, he
has already demitted his office in the year 2018, and in such
circumstances, this Court is of the considered opinion that if any
action is taken against the company, the apprehension of the
petitioner is genuine that the FIR may also be lodged against him
in his individual capacity. In such circumstances, the decision
rendered by the Supreme Court in the case Rajesh Agrawal &
Ors. (supra) would come to rescue the petitioner. Paras 98 and 99
of which read as under:-
“98. The conclusions are summarized 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 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;
98.6. The principles of natural justice demand that the
Signature Not Verified
Signed by: PANKAJ
PANDEY
Signing time: 20-09-2024
16:57:02
NEUTRAL CITATION NO. 2024:MPHC-IND:27687
W.P. No.29580 of 2023
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 December 2020 is upheld.
The judgments of the High Court of Telangana dated 22
December 2021 and 31 December 2021, and of the High
Court of Gujarat dated 23 December 2021 are accordingly set
aside. The Civil Appeals are disposed of. Writ Petition (C)
No. 138 of 2022 is also disposed of in above terms. There
shall be no order as to costs.
(Emphasis Supplied)
9] In view of the same, the petition also deserves to be
allowed, and it is directed that any action taken by the
respondents/banks against the company shall be in respect of
company only, and pursuant to which no FIR shall be lodged
against the petitioner. However, the respondents/Banks shall be
free to proceed against the petitioner, in accordance with law in
the light of the observations made by the Supreme Court in the
case of Rajesh Agrawal & Ors. (supra).
10] With the aforesaid, the petition stands disposed of.
(SUBODH ABHYANKAR)
JUDGE
Pankaj
Signature Not Verified
Signed by: PANKAJ
PANDEY
Signing time: 20-09-2024
16:57:02
