TaxTMI 
TaxTMI 
2025 (3) TMI 1053
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....peaching the impugned direction given by the learned Single Judge vide judgment and order dated 22.05.2024, it has been argued by learned counsel appearing for the IDBI Bank that the said direction is based on misreading of the judgment of the Hon'ble Supreme Court in State Bank of India and others v. Rajesh Agarwal and Others, (2023) 6 SCC 1 (hereinafter referred to as 'Rajesh Agarwal') inasmuch as, that in the said judgment what all has been provided by the Hon'ble Supreme Court is that an opportunity of hearing to the borrowers should be provided before passing an order declaring the account of the borrower as fraud, however, which should not be construed as opportunity of personal hearing. 3. It has further been argued that proceedings drawn consequent upon a show cause notice issued under the Reserve Bank of India (Master Directions on Frauds Classification and Reporting by Commercial Banks and Select FIs) Directions 2016. (hereinafter referred to as the 'RBI Directions') are administrative proceedings and, therefore, the process of fair hearing need not be at the standard of a judicial proceeding and, consequently, opportunity of personal hearing in such proceedings is not a....
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.... 2021, wherein it was clearly directed that an opportunity of personal hearing shall be given to the borrower, the very basic premise of this appeal is based on a complete misreading of the judgment of the Hon'ble Supreme Court in Rajesh Agarwal, (supra). 8. In substance, the submission on behalf of the respondents is that once the Hon'ble Supreme Court in Rajesh Agarwal, (supra) upheld the judgment of the Hon'ble High Court of Telangana which provided for opportunity of personal hearing, the instant appeal is highly misconceived which is liable to be dismissed. 9. We have considered the competing submissions made on behalf of the respective parties and have also perused the records available before us on this Letters Patent Appeal. 10. The only issue which arises for our consideration for appropriate adjudication of this appeal is as to whether the principle of audi alteram partem which has been read to have not been excluded by the Hon'ble Supreme Court in Rajesh Agarwal (supra) in respect of the proceedings drawn under the RBI Directions would mean providing right of personal hearing as well or it would only mean permitting the borrower to file reply to the show cause notice ....
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....te of Orissa v. Binapani Dei [State of Orissa v. Binapani Dei, AIR 1967 SC 1269], a two-Judge Bench of this Court held that every authority which has the power to take punitive or damaging action has a duty to give a reasonable opportunity to be heard. This Court further held that an administrative action which involves civil consequences must be made consistent with the rules of natural justice : (AIR p. 1271, para 9) "9. ... The rule that a party to whose prejudice an order is intended to be passed is entitled to a hearing applies alike to judicial tribunals and bodies of persons invested with authority to adjudicate upon matters involving civil consequences. It is one of the fundamental rules of our constitutional set-up that every citizen is protected against exercise of arbitrary authority by the State or its officers. Duty to act judicially would therefore arise from the very nature of the function intended to be performed : it need not be shown to be super-added. If there is power to decide and determine to the prejudice of a person, duty to act judicially is implicit in the exercise of such power. If the essentials of justice be ignored and an order to the prejudice of a....
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....sification of account of a borrower as fraud results in civil consequences against the borrower, it has thus, been concluded in Rajesh Agarwal, (supra) that application of principle of audi alteram partem cannot be excluded under the RBI Directions on fraud and that it is reasonably practicable for lender banks to provide for an opportunity of hearing to the borrowers before classifying their accounts as fraud. 16. In paragraph 99, the Hon'ble Supreme Court in Rajesh Agarwal, (supra) has clearly upheld the judgment of the Division Bench of the Hon'ble High Court of Telangana dated 10.12.2020 (2020 SCC OnLine TS 2021) and other such judgments. Paragraph 99 of Rajesh Agarwal (supra) is quoted below:- "99. In the result, the judgment of the Division Bench of the High Court of Telangana dated 10-12-2020 [Rajesh Agarwal v. RBI, 2020 SCC OnLine TS 2021] is upheld. The judgments of the High Court of Telangana dated 22-12- 2021 [Shree Saraiwwalaa Agrr Refineries Ltd. v. Union of India, 2021 SCC OnLine TS 1816] and 31-12-2021 [Yashdeep Sharma v. RBI, 2021 SCC OnLine TS 1852], and of the High Court of Gujarat dated 23-12-2021 [Mona Jignesh Acharya v. Bank of India, 2021 SCC OnLine Guj 281....
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....raud or not. 19. Since, in paragraph 99, the Hon'ble Supreme Court has upheld the said decision of the Hon'ble High Court of Telangana (2020 SCC OnLine TS 2021), in our considered opinion, reading the conclusion in Rajesh Agarwal, (supra), as can be found in paragraph 98.4, to mean that in proceedings under the RBI Directions, opportunity of hearing would not include opportunity of personal hearing, is untenable. Once, the Hon'ble Supreme Court upheld the judgment of the Hon'ble High Court of Telangana which clearly had directed for providing an opportunity of personal hearing as well, to conclude that opportunity of hearing would not include opportunity of personal hearing, in our opinion, will be erroneous. 20. The submission made by learned counsel representing the appellant that the proceedings consequent upon the show cause notice under the RBI Directions are administrative proceedings as such the process of fair hearing will not be at the standard of a judicial proceeding, in our considered opinion, does not have any bearing to the instant case for the reason that the Hon'ble Supreme Court in Rajesh Agarwal, (supra) has clearly reiterated the well-known principle of law tha....