Justice Dharmesh Sharma said that the operation of the Bank’s July 5 order for the “declaration or classification of the account of the petitioner (Atul) as fraud is concerned, be kept in abeyance till the next date of hearing” on September 17.
However, it gave at liberty to the lender to file a report with the RBI as also with the Central Bureau of Investigation/Police for initiation of appropriate proceedings against Atul in accordance with law. “The action may be undertaken without prejudice to the rights and contentions of the parties. If the respondent (IDBI Bank) elects to review their decision in view of the findings recorded hereinabove, this court shall also be at liberty to afford an opportunity of hearing to the petitioner and take appropriate decision in accordance with law,” the single judge bench said.
Atul had challenged the IDBI Bank’s July 5 order to declare his account as fraud in respect of loans taken by Punj Lloyd. The bank, which have financed the corporate borrower under multiple banking arrangement, had passed the order in exercise of its power as per the RBI’s Master directions.
Senior counsel Sandeep Sethi, appearing for Atul, argued that the process to declare banking transactions or accounts as fraud could only be based on the majority rule of agreement amongst the banks with at least 60% share in the total lending.
However, IDBI Bank counsel Sidhartha B said that the bank in its individual capacity was not precluded from conducting an independent inquiry and come to a different conclusion than the one reached by other member banks of the consortium.However, the HC noted that according to the RBI Master directions, an individual bank was entitled to get the accounts of the corporate borrower examined and audited independently, and it can certainly reach a different conclusion with regard to status of the accounts of the corporate borrower and thereby, could “red flag” the same. However, the remedy is only to report the fraud to the RBI within 20 days of detection and also report the matter to the CBI or the police for criminal action, the order stated.“A careful perusal of the aforesaid RBI directions bring out that the individual bank has no jurisdiction to unilaterally declare the account as “fraud” in the absence of consent accorded by the member banks in the consortium who have given more than 60% of the lending,” the HC said.
Atul had told the HC that in a meeting by all the lenders of Punj Lloyd, a consortium of 29 member banks had found nothing wrong, in which 61.16% of the banks found that “no fraud” was committed by the petitioner and the other promoter directors while 21.09% were yet to take any decision.
