HC raises concerns over ‘copy-paste’ bank orders declaring loan accounts ‘fraud,’ asks Anil Ambani to approach RBI

Earlier this month, the HC stayed a similar decision of Canara Bank against Anil Ambani till further orders.

On Thursday, a bench of Justices Revati Mohite-Dere and Neela K Gokhale was hearing a plea by Ambani against Union Bank of India’s order dated October 10, 2024, claiming he was not granted any hearing before the decision.

He had challenged two showcause notices issued by the bank in that regard and claimed that he was not provided with the documents the bank relied upon to issue an impugned order.

The bench expressed that it had time and again come across matters challenging orders of the banks declaring accounts as ‘fraudulent’ or’ wilful defaulter’ without following norms prescribed in the Reserve Bank of India (RBI) master circular that permitted banks to declare any account as a fraudulent account and laid down guidelines for the same.

It said the decisions were taken merely by picking up from auditors’ reports, cut, copy and paste their findings. The bench said the committee of the bank was not independently applying its own mind, and should be mindful where ‘public money’ was involved.

“There cannot be such cut, copy and paste findings of auditors and there has to be some application of mind. Such orders cannot be passed in a casual manner and some mechanism be put in place,” the bench orally remarked.

It raised a concern that the banks will continue to pass such orders unless RBI takes action against their officials, which appear to have been ‘deliberately’ doing so. The court said there has to be ‘checks and balances’ to curb such a practice to ensure the same does not go on.

“It is incumbent on you to do things properly. Ultimately, it is public money,” the bench told the RBI lawyer.
Senior advocate Venkatesh Dhond, representing the RBI, then said that the aggrieved persons can make an online complaint with the RBI in case of violation of principles of natural justice. Dhond said after a complaint is filed, the RBI will examine the aspect if prescribed procedures under the master circular and subsequent guidelines were followed while issuing an order and will not go into the merits of the matter.

The court accepted Dhond’s statement and directed Ambani to lodge a complaint with the RBI. It refused to pass any protective order from coercive steps for Ambani, noting that nothing much has proceeded against his companies despite the UBI passing orders (of classification his account fraud) in October last year.

The RBI said that it will ensure banks come up with internal policies for fraud declaration as per master circular. The HC sought its response on action against banks violating master circular and posted further hearing after two weeks.