The Bombay High Court on Friday flagged the casual and “cut, copy, paste” manner in which banks classify loan accounts as wilful defaulters or fraud. The court directed industrialist Anil Ambani to lodge a complaint with the Reserve Bank of India (RBI) against an order passed by the Union Bank of India declaring his loan account as fraud last October.
A bench of Justices Revati Mohite Dere and Neela Gokhale was hearing a petition filed by Anil Ambani challenging the October 10, 2024, order passed by the Union Bank of India declaring his loan account as fraud. Ambani contended that he was not granted a hearing before the order was passed. He also challenged two show-cause notices issued to him by the bank. As per the plea, Ambani had sought the bank’s full audit report and all relevant documents relied upon before passing the order.
He claimed that despite writing to the bank, it neither provided the relevant documents nor granted him a hearing.
On Friday, the judges remarked that they were repeatedly coming across cases where banks were declaring accounts as fraud or wilful defaulters without following the guidelines laid down by the RBI in its master circulars. “There cannot be such cut, copy, paste orders. There has to be some application of mind. Ultimately, this is public money. We cannot have such orders passed in such a casual manner. There has to be some mechanism put in place,” the judges said.
The court emphasised that banks must follow the guidelines issued by the RBI in its master circular.
The bench also asked the regulatory body to establish a mechanism to address this issue. It observed that unless the RBI takes action against banks and the officers concerned, such orders will continue to be passed. “We feel this is being done deliberately. There have to be checks and balances; otherwise, this will go on,” the court said.
It also raised concerns that when multiple allegations arise against one bank, there could be something “at play.”
RBI counsel Venkatesh Dhond informed the court that any aggrieved person could send an email and lodge a complaint with the RBI if they believed that a bank’s order violated the principles of natural justice.
He clarified that when such a complaint is filed, the RBI would not examine the case’s merits but would only verify whether the bank followed all mandatory procedures before passing the order.
The court accepted this clarification and directed Ambani to lodge his complaint with the RBI.
It also directed the Union Bank of India to file an affidavit in response to Ambani’s petition and scheduled the matter for further hearing on March 13.
