TaxTMI 
TaxTMI 
2026 (7) TMI 1677
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....is filed seeking to challenge the impugned order dated 11th August 2025 (Exhibit "Y" to the Petition) issued by Respondent No. 1 declaring the account of the Petitioner as "fraud". Further, a Mandamus is sought to direct Respondent No. 1 to withdraw all the consequential proceedings which have been initiated, as a result of declaring/classifying the Petitioner as a fraudulent borrower on 11th August 2025, including that of reporting the Petitioner's name to the Central Fraud Registry, Reserve Bank of India. 3. It is the case of the Petitioner that he was a Director of a company called "Paramshakti Steels Limited" (for short "PSL") which was incorporated on 31st May 1995. The Petitioner was appointed as an additional Director of PSL on 8t....
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....th December 2018 (for short "Review Period"). This Forensic Audit Report (for short "FAR") was finally furnished by Batliboi and Purohit, Chartered Accountants, to the 1st Respondent Bank on 20th June 2020. It transpires that before the FAR, a successful resolution plan for the revival of PSL was approved by the NCLT in February 2019. 5. Be that as it may, on the basis of the FAR dated 20th June 2020 and nearly 4 years thereafter, the 1st Respondent issued a Show Cause Notice dated 4th May 2024 to the Petitioner calling upon him to show cause why he should not be declared as "fraud". On 20th May 2024, the Petitioner replied to the Show Cause Notice inter alia pointing out that: (a) he had issued previous correspondence to the 1s....
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....nal guarantor to the loans and financial facilities availed by PSL; (c) the FAR had failed to demonstrate what role was played by the Petitioner in respect of any of the fraudulent transactions alleged by the Forensic Auditor; (d) the Forensic Auditor had expressed that they were unable to access the records of PSL directly; (e) the FAR did not even remotely suggest that the Petitioner was related to or connected to any of the entities, namely, Kredence Multi Trading Ltd; Blackstone Multi Trading Pvt Ltd; Palak Agency Pvt Ltd; UA Trading Company Pvt Ltd; Grow Well Mercantile Pvt Ltd or with Ratnesh Ispat Pvt Ltd or with those entities or persons against whom Union Bank of India or State Bank of India have filed cr....
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....ubmitted that the impugned order, being contrary to the mandate set out in the Fraud Master Circular of 2024, cannot be sustained and has to be quashed and set aside. 8. On the other hand, the learned Advocate appearing on behalf of the 1st Respondent Bank submitted that there is no merit in the contentions canvassed on behalf of the Petitioner. Firstly, it was submitted that it is incorrect to state that the impugned order is unreasoned. According to the learned advocate, the order is a reasoned order, though the reasons may not be to the liking of the Petitioner. He, therefore, submitted that the order cannot be termed as unreasoned and therefore assailed on that ground. 9. As far as the argument that no transaction is attributable ....
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.... relied upon, the submission made against the SCN and the reasons for classification as fraud or otherwise." 12. As can be seen from the aforesaid provision, as per the Fraud Master Circular of 2024, the Reserve Bank of India has mandated that before any person or entity is declared/classified as a "fraud", a reasoned order has to be passed to substantiate such classification. 13. Since this is the mandate of the RBI, we have to now examine whether, in fact, the impugned order is one that is unreasoned as canvassed by the Petitioner. As mentioned earlier, the impugned order can be found from pages 303 to 312 of the paperbook. Paragraph 2 of the impugned order basically sets out the facilities and limits granted by the 1st Respondent B....
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....ounsel appearing on behalf of the 1st Respondent Bank submitted that since the impugned order is set aside on the ground that it is wholly unreasoned, the 1st Respondent Bank be granted liberty to restart the proceedings from the stage of the Show Cause Notice, take the submissions of the Petitioner into account and thereafter pass a fresh order which would be a reasoned one. 17. In normal circumstances, we would have acceded to this request of the 1st Respondent Bank. However, in the peculiar facts of the present case, we find that the Petitioner was first appointed as an additional Director on 8th April 2014 and thereafter was appointed as a Director on 3rd September 2014. From 1st April 2015 till his resignation on 17th October 2015, ....