{"id":323337,"date":"2024-05-31T17:30:39","date_gmt":"2024-05-31T12:00:39","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=323337"},"modified":"2024-06-06T11:55:29","modified_gmt":"2024-06-06T06:25:29","slug":"ph-hc-quashes-fir-registered-against-borrowers-scctimes","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/05\/31\/ph-hc-quashes-fir-registered-against-borrowers-scctimes\/","title":{"rendered":"\u2018Accounts declared as fraud without adhering to principles of audi alteram partem\u2019; Punjab and Haryana HC quashes FIR against borrowers"},"content":{"rendered":"
\n

Punjab and Haryana High Court:<\/span> 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*<\/span> 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.<\/p>\n

Background<\/p>\n

Since, common challenge was made in all the writ petitions, therefore they were taken up together for adjudication.<\/p>\n

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<\/span> v. RBI<\/span>, 2020 SCC OnLine TS 2021<\/a>, 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.<\/p>\n

Analysis, Law and Decision<\/p>\n

The Court opined that in SBI v. Rajesh Agarwal<\/span>, (2023) 6 SCC 1<\/a>, (‘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.<\/p>\n

The Court opined that as per Rajesh Agarwal case (supra)<\/span>, 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<\/a> of the Criminal Procedure Code, 1973<\/a> read with Article 226<\/a> of the Constitution<\/a>. Therefore, the Court relied on State of Punjab<\/span> v. Davinder Pal Singh Bhullar<\/span>, (2011) 14 SCC 770<\/a> 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.<\/p>\n

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.<\/p>\n

[AGR Steel Strips (P) Ltd. v. RBI, 2024 SCC OnLine P&H 4290<\/a>, decided on 27-05-2024<\/span>]<\/p>\n

*Judgment authored by- Justice Sureshwar Thakur<\/span><\/strong><\/p>\n\n

Advocates who appeared in this case :<\/p>\n

For the Petitioners:<\/span> 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.<\/p>\n

For the Respondents:<\/span> 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.<\/p>\n

Buy Constitution of India  HERE<\/a><\/h3>\n

\"Constitution<\/a><\/p>\n

Buy Code of Criminal Procedure, 1973  HERE<\/a><\/h3>\n

\"Code<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Respondents submitted that no opportunity of personal hearing was required to be assigned to the aggrieved, before the FIR was filed and registered.<\/p>\n","protected":false},"author":67520,"featured_media":314970,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[32041,21444,4311,10141,2805,36760,2670,21114,34704],"class_list":["post-323337","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-highcourts","tag-accounts","tag-audi-alteram-partem","tag-borrowers","tag-fraud","tag-natural_justice","tag-personal-hearing","tag-Punjab_and_Haryana_High_Court","tag-quashing-of-fir","tag-rbi-circular"],"yoast_head":"\nP&H HC quashes FIR registered against borrowers| SCC Times<\/title>\n<meta name=\"description\" content=\"Punjab and Haryana High Court opined that as the FIR was registered without adherences to the principles of natural justice, therefore, it was required to be quashed and set aside.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.scconline.com\/blog\/post\/2024\/05\/31\/ph-hc-quashes-fir-registered-against-borrowers-scctimes\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"\u2018Accounts declared as fraud without adhering to principles of audi alteram partem\u2019; 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Court quashes order passed by Registrar","author":"Editor","date":"May 25, 2021","format":false,"excerpt":"Uttaranchal High Court: Manoj Kumar Tiwari, J., allowed petitions which were filed having the common question of law and facts thus were taken together with the consent of parties. The petitioner was elected as Director\/Member of Committee of Management of a Cooperative Society, namely, Buhuddesiya Narsan Gurukul Kisan Sewa Sahkari\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":295138,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/06\/21\/bombay-high-court-stays-bank-action-rbi-master-circular-on-frauds\/","url_meta":{"origin":323337,"position":3},"title":"[RBI Master Circular on fraud classification] Bombay High Court stays action by banks till September 11","author":"Ridhi","date":"June 21, 2023","format":false,"excerpt":"Bombay High Court noted that all the petitions in the instant matter complained against the violation of principles of natural justice while following RBI directions.","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"bombay high court","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/bombay-high-court.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/bombay-high-court.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/bombay-high-court.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/bombay-high-court.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":379040,"url":"https:\/\/www.scconline.com\/blog\/post\/2026\/03\/23\/bank-issue-notice-before-entering-directors-names-in-central-fraud-registry-bom-hc\/","url_meta":{"origin":323337,"position":4},"title":"Banks must issue notice before making fraud declaration and entering Directors\u2019 names in Central Fraud Registry: Bombay HC","author":"Sunaina","date":"March 23, 2026","format":false,"excerpt":"\u201cBanks are required to issue prior notice and provide a hearing to affected parties before proceeding with classifying an account as fraud and entering the names of the Directors of a company in the Central Fraud Registry.\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"entering Directors’ names in Central Fraud Registry","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/03\/entering-Directors8217-names-in-Central-Fraud-Registry.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/03\/entering-Directors8217-names-in-Central-Fraud-Registry.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/03\/entering-Directors8217-names-in-Central-Fraud-Registry.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/03\/entering-Directors8217-names-in-Central-Fraud-Registry.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":245665,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/03\/16\/audi-alteram-partem\/","url_meta":{"origin":323337,"position":5},"title":"[Audi Alteram Partem] Raj HC | Whether complainant\u2019s revision against dismissal of his complaint, can be decided without giving an opportunity of hearing to the accused petitioner? 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