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Banks acting bona fide can't be made answerable to judiciary on decisions: Delhi HC
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....anks acting bona fide can't be made answerable to judiciary on decisions: Delhi HC<BR>PTI News<BR>Dated:- 3-11-2025<BR>PTI<BR>New Delhi, Nov 3 (PTI) The Delhi High Court on Monday held that banks, acting bona fide, cannot be made answerable to the judiciary regarding the economic expediency of their decisions and easy allegations of financial impropriety by banks should not be entertained by court....
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....s unless cogent material is shown. The high court said the banking sector constitutes the backbone of the nation's economy and it is the duty of the court to apprise itself of the facts by calling on the banks and other associated or involved enterprises to answer the allegations before setting the inquisitorial ball rolling. "Easy allegations of financial impropriety by banks should not be en....
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....tertained by courts. Banks, acting bona fide, cannot be made answerable to the judiciary regarding the economic expediency of their decisions, except where the attention is drawn, by the court, to cogent material which seems to point in that direction," a bench of Justices C Hari Shankar and Ajay Digpaul said. The bench made the observations while dismissing a public interest litigation (PIL) fi....
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....led by NGO Infrastructure Watchdog seeking probe by the Central Bureau of Investigation (CBI) and Central Vigilance Commission (CVC) into alleged undervaluation of Hyatt Regency Hotel in one-time settlement (OTS) deals between Asian Hotels (North) Private Limited and two public sector banks — Punjab National Bank (PNB) and Bank of Maharashtra (BoM). The high court said no case was made out for....
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.... the issuance of notice in the petition which was merely in the nature of a shot in the dark, based on surmises, conjectures and assumptions. The plea alleged that while executing the OTSs, the valuation of the hotel was unreasonably depressed, resulting in huge haircuts having to be borne by the banks. A haircut in finance is the reduction applied to the market value of an asset. The court ....
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....observed that earning a profit in every commercial transaction into which they embark cannot be regarded as a solemn legal duty of banks and all that is expected is that efforts should be made to ensure necessary checks, enquiries and due diligence are observed in such cases. "Once this is done, the transaction cannot be called into question, in a court, on the ground that it was not financially....
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.... expedient, or that it resulted in a loss which might have been avoided, had another avenue been explored," it said. The court agreed with the submissions of the Attorney General and the Additional Solicitor General that entertaining such petitions could throw the entire banking system into jeopardy, and disincentivise banks and financial institutions from entering into bona fide commercial tran....
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....sactions. "Without meaning, in any manner, to doubt the bona fides of the present petitioner, the court has also to be alive to the fact that entertainment of a litigation such as this would provide fodder for unscrupulous quasi-public interest litigants to call high-value commercial transactions into question and seek investigations into such transactions by the CVC, CBI etc," it said. The co....
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....urt added that the possibility of blackmail, in the garb of public interest litigations, looms large and the deleterious and debilitating effect, which any such directions could cause, can well be imagined. It said every such transaction would become vulnerable to being dragged into court at the instance of persons who claimed to be public-spirited citizens, with fragmentary information, on the ....
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....basis of which a case for investigation by agencies such as the CVC and CBI is sought to be made out. "We are clear in our minds that such attempts must be nipped in the bud," it added. The bench said issuance of notice in a petition seeking investigation into the affairs of a corporate entity by the CBI is a serious matter. It throws the affairs of the entity itself into disarray, and may s....
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....eriously impact, not only its reputation, but also its corporate standing, within India and at times globally, the court said. It further observed that every aspect of public life, especially where it is subject to judicial scanner, is up for debate in the public domain, while adding that reputations, built over years, crumble in an instant. "Molehills metamorphose into mountains, in the virtu....
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....al universe. While these considerations cannot impact the decision of the court to institute an investigation into corporate affairs, where misconduct or malfeasance in such affairs is brought to the notice of the court in properly instituted proceedings, the court should, to our mind, be wary of setting the criminal – or even investigative – ball rolling, against any entity, corporate or othe....
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....rwise, merely on being petitioned by speculators, howsoever well intentioned they may be," the bench said. Regarding the case, the court said the petitioner NGO, merely on the basis of a valuation report submitted in respect of the hotel, presumed that the property was undervalued and that BOM and PNB were complicit in that regard. PTI SKV SKV KSS KSS<BR> News - Press release - PIB....