HC Orders Bank to Supply Investigation Report and Annexures with SCN for Fraud Categorization of Petitioner’s a/c

Case Details: Ascon Dairy (P.) Ltd. v. State Bank of India - [2024] 164 taxmann.com 199 (HC-Delhi)

Judiciary and Counsel Details

• Ms Mini Pushkarna, J.
• Mudit Jain & Rudraksh Nakra, Advs. for the Petitioner.
• Rajiv Kapur, Akshit Kapur & Aditya Saxena, Advs. for the Respondent.

Facts of the Case

In the instant case, the respondent bank issued a show cause notice (SCN), directing the petitioner to show cause as to why its account/name should not be categorised and reported as Fraud, as per the Reserve Bank of India (RBI).

While issuing SCN, the bank failed to provide all documents relied upon in SCN, though there were some communications between the parties, wherein the petitioner repeatedly requested the supply of all requisite documents.

It was noted that the said dereliction was a serious one, as without supplying documents that had been relied upon in said SCN, it would not be possible to give an effective and proper reply to said SCN by the petitioner.

High Court Held

The High Court observed that non-supply of underlying documents at the time of issuance of an SCN would have the effect of directly impinging upon the right of representation of a party in terms of the Principles of Natural Justice.

Further, the High Court observed that the principles of natural justice must be strictly followed to give a party an efficacious opportunity to represent its case suitably and adequately. The same could not be reduced to an empty formality by not affording an appropriate opportunity to a party or giving access to relevant documents that form the basis of the issuance of an SCN.

The High Court held that it was imperative that the petitioner was supplied complete underlying documents, as relied upon in SCN, to allow the petitioner to make an effective reply.

Accordingly, the instant petition by the petitioner seeking direction for setting SCN with further prayer for directions to the bank to allow inspection and furnish all relied-upon documents in SCN was to be allowed. Further, the bank was directed to provide an Investigation report along with full annexures to the petitioner, and liberty was also granted to the petitioner to request a personal hearing, which request would be considered by the bank.