Lender Banks should provide an opportunity to a Borrower by furnishing a copy of Audit Reports and allow the borrower a reasonable opportunity to submit a representation before classifying the account as fraud – Amit Dineshchandra Patel Vs. Reserve Bank of India – Gujarat High Court

Hon’ble Gujarat High Court referred the judgment of the Apex Court in State Bank of India & Ors. Vs. Rajesh Agarwal & Ors. (2023) ibclaw.in 36 SC and held that rule of audi alteram partem has been read into clauses 8.9.4 and 8.9.5 of the Master Directions of 2016 on frauds. The Apex Court has also directed that consistent with the principles of natural justice, the lender banks should provide an opportunity to a borrower by furnishing a copy of the audit reports and allow the borrower a reasonable opportunity to submit a representation before classifying the account as fraud coupled with passing of a reasoned order on the objections addressed by the borrower.

In the present case, no such steps have been taken by the respondent lender banks and therefore, on this limited ground of violation of principles of natural justice, the decision of the respondent banks declaring the account of the company as fraud is hereby quashed and set aside.

Lender Banks should provide an opportunity to a Borrower by furnishing a copy of Audit Reports and allow the borrower a reasonable opportunity to submit a representation before classifying the account as fraud – Amit Dineshchandra Patel Vs. Reserve Bank of India – Gujarat High Court Read Post »