M/S Sa Infrastructure Through Proprietor Sayyed Afsar Ali vs. Bank Of INDIA

Held

The Court dismissed all three writ petitions. It held that the respondent bank had followed the necessary procedures prescribed by law. The Court noted that 31 days' time was granted to the petitioners, which exceeded the minimum 21 days required by the Master Circular. While the petitioners claimed their documents were with the GST Department, the Court found this did not absolve them of their responsibility to file a reply. The classification of accounts as "Fraud" was based on observations in a forensic audit, not mere suspicion. The Court found no procedural impropriety in the Zonal Manager issuing the notice and the Fraud Monitoring Group passing the order, stating that such issues are decided based on available material and the authority passing the order had applied its mind. The Court reiterated that writ petitions challenge the decision-making process, not the correctness of the decision itself. Finding no arbitrariness, impropriety, or illegality in the process, and considering the significant amount identified as fraud (Rs. 43 Crores), the Court concluded that the action taken by the respondent was neither unjust nor improper, nor against the settled principles of law, including natural justice. Therefore, no interference was called for.

Facts

Three writ petitions were filed before the Madhya Pradesh High Court at Indore. The petitioners, M/s SA Infrastructure, Saiyyed Owais Ali and others, and VR Construction, challenged orders dated August 24, 2026, and September 10, 2026, which declared their accounts as "Fraud." The petitioners argued that these classifications were made based on forensic audits without adhering to principles of natural justice, specifically by not providing adequate time to submit replies and documents, and by issuing notices and orders from different authorities (Zonal Manager, Bank of India, Ujjain, and the Fraud Monitoring Group, Bhopal). The Bank of India, the respondent, contended that sufficient time (31 days) was granted, exceeding the minimum 21 days stipulated by RBI Master Directions, and relied on Supreme Court judgments clarifying the process.

Key Issues

1. Whether the classification of the petitioners' accounts as "Fraud" by the respondent bank, based on forensic audit reports, violated the principles of natural justice, particularly concerning the opportunity to file a reply and present documents, and the proper issuance of notices and orders by the relevant authorities, as per the law laid down in State Bank of India & Ors. v. Rajesh Agarwal & Ors.? Petitioner's Arguments: - The classification as "Fraud" was impermissible without adhering to principles of natural justice, citing State Bank of India & Ors. v. Rajesh Agarwal & Ors. - The GST Department seized all their records, hindering their ability to prepare a reply. - Notices were issued by the Zonal Manager, Bank of India, Ujjain, while the impugned order was passed by the Fraud Monitoring Group, Bhopal, indicating a procedural flaw. - The decision-making process was not in consonance with the law, as they were not given adequate opportunity to collect documents and file a reply. Respondent's Arguments: - The Supreme Court's judgment in State Bank of India Vs. Amit Iron Private Limited and Ors. clarified that an opportunity of personal hearing is required, and the RBI Master Directions on Fraud Risk Management, 2024, incorporate this. - Sufficient time (31 days) was granted, exceeding the minimum 21 days required by circulars. - Relied on the Bombay High Court judgment in Urvil Akshaya Jani Vs. Punjab National Bank, which stated that in writ jurisdiction, the court examines the decision-making process, not the merits of the decision, and if due process is followed for any ground, the order cannot be assailed.