Punjab and Haryana High Court: In a case wherein, the FIR was registered against the petitioners-borrowers, after petitioners’ accounts were classified as fraud as the RBI circular dated 01-07-2016 (‘Master Circular’), the Division Bench of Sureshwar Thakur* and Lalit Batra, JJ., opined that since, the FIR filed against the petitioners was regarding declaration of petitioners’ accounts as fraud without adherences to the principles of audi alteram partem, therefore, the FIR was required to be quashed and set aside. The Court further stated that if any FIR was lodged against the petitioners, which were interlinked with the declarations of fraud of the petitioners’ accounts, without adhering to the principles of audi alteram partem, were also likewise quashed and set aside. However, the Court granted liberty to the lending institutions to take actions against the petitioners, as deemed fit, after adhering to the principles of natural justice.
Background
Since, common challenge was made in all the writ petitions, therefore they were taken up together for adjudication.
Petitioners’ accounts were classified as ‘fraud’ as per the Master Circular and accordingly, FIR was registered against them. Petitioner stated that as per Rajesh Aggarwal v. RBI, 2020 SCC OnLine TS 2021, that classification of petitioners’ accounts as fraud would not sustain, if the principles of audi alteram partem were not adhered by the entity concerned. In the present case, petitioners accounts were declared as fraud, but without any adherence made to the principles of natural justice.
Analysis, Law and Decision
The Court opined that in SBI v. Rajesh Agarwal, (2023) 6 SCC 1, (‘Rajesh Agarwal case’) it was held that the twin principles of natural justice were entrenched in the Indian jurisprudence. Further, Chapter VIII of the Master Circular provided detailed procedures to be followed by the banks before forming an opinion to proceed with a criminal complaint against the borrowers. It was also held that the process of forming an informed opinion on frauds under the Master Circular, was administrative in nature. Since it was a settled principle of law that the rule of audi alteram partem, applied to administrative actions apart from judicial and quasi-judicial functions, therefore, it was mandatory that prior to the declarations being made in terms of the Master circular, an opportunity of being heard was required to the aggrieved.
The Court opined that as per Rajesh Agarwal case (supra), prior to the registration of the FIR, the principles of natural justice were not required to be adhered to by the lending institutions concerned. However, it did not restrict the inherent jurisdiction of the High Court under Section 482 of the Criminal Procedure Code, 1973 read with Article 226 of the Constitution. Therefore, the Court relied on State of Punjab v. Davinder Pal Singh Bhullar, (2011) 14 SCC 770 and stated that if any FIR was registered against the petitioners regarding declaring their accounts as fraud, rather that fraud or tainted, without adhering to the principles of audi alteram partem, were ordered to quashed and set aside.
The Court opined that since, the FIR filed against the petitioners was regarding declaration of petitioners’ accounts as fraud without adherences to the principles of audi alteram partem, therefore, the present FIR was required to be quashed and set aside. The Court further stated that if any FIR was lodged against the petitioners, which were interlinked with the declarations of fraud of the petitioners’ accounts, without adhering to the principles of audi alteram partem, were also likewise quashed and set aside. Moreover, if any FIRs which was filed against the petitioners, were rested upon such illegally made declarations, were also liable to be quashed and set aside. The Court granted liberty to the lending institutions to take actions against the petitioners, as deemed fit, after adhering to the principles of natural justice.
[AGR Steel Strips (P) Ltd. v. RBI, 2024 SCC OnLine P&H 4290, decided on 27-05-2024]
*Judgment authored by- Justice Sureshwar Thakur
Advocates who appeared in this case :
For the Petitioners: Anand Chhibbar, Senior Advocate with Shikhar Sarin, Advocate, Nitin Kaushal, Advocate, Tanuj Sud, Advocate, Ajay Kumar, Advocate, Stuti Vatsa, Advocate, Alok Jagga, Advocate, Harkirat Singh, Advocate, Vibhu Aggarwal, Advocate, and Karan Inder Singh, Advocate; V.K. Sachdeva, Advocate and Pulkit Sachdeva, Advocate; Namit Gautam, Advocate; Sandeep Wadhawan, Advocate and Suvir Tandon, Advocate; Puneet Bali, Senior Advocate, with Surjeet Bhadu, Advocate, Anmol Chauhan, Advocate, Agam Bansal, Advocate, Veer Singh, Advocate, Sanya Thakur, and Gagandeep Singh, Advocates; Sidhi Bansal, Advocate and Ridhi Bansal, Advocate; Isha Goyal , Advocate; D.S. Sobti, Advocate; Vijiyesh Malhotra, Advocate; Palak Dev, Advocate; Abhimanyu Tewari, Advocate; Harsh Chopra, Advocate.
For the Respondents: Deepak Suri, Advocate; Umang K. Khosla, Advocate; Lovish, Advocate, for R.S. Bhatia, Advocate; Arvind Seth, Sr. Panel Counsel; Sandeep Suri, Advocate; Kamal Satija, Advocate; C.S. Pasricha, Advocate, Ashish Kumar Sharma, Advocate and Sushil K. Bhardwaj, Advocate, K.P.S. Dhillon, Advocate, Gaurav Goel, Advocate, D.K. Gupta, Advocate and Garima Gupta, Advocate; Madhu Dayal, Advocate; Akshay Jain, Advocate, Mayank Mathur, Advocate; Deepak Sabherwal, Advocate; Manjari Joshi, Advocate; Rakesh Gupta, Advocate, Rakshit Gupta, Advocate, and Manvi Arora, Advocate; Akshay Jain, Advocate; C.S. Pasricha, Advocate; Ashish Kumar Sharma, Advocate and Sushil K. Bhardwaj, Advocate; Akashdeep Singh, Special Public Prosecutor; Gaurav Goel, Advocate; Shailender Kashyap, Advocate, and Parshant Sethi, Advocate; Dr. Deepak Jindal, Advocate; Vishwas Kumar, Advocate; Atul Bhatia, Advocate; Abhay Karan Khanna, Advocate, and N.C. Sahni, Advocate; C.S. Pasricha, Advocate, Ashish Kumar Sharma, Advocate and Sushil K. Bhardwaj, Advocate; Harsh Garg, Advocate, Madhu Dayal, Advocate; Satya Pal Jain, Additional Solicitor General of India with Neha Awasthi, Senior Panel Counsel; Jaivir Singh, Advocate, for Ashish Rawal, Advocate; Anirudh Gupta, Advocate.
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