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Delhi High Court rules in favour of ADAG companies after fraud account tag by BoB and PNB


MUMBAI: Anil Ambani group companies Reliance Home Finance and Reliance Commercial Finance have secured interim order from the Delhi High Court that has restrained Bank of Baroda and Punjab National Bank from classifying the accounts as fraud. These companies in their petition have claimed that the banks did not give them a hearing before declaring them as fraudulent.

“The category of ‘fraud’ shall be kept in abeyance till the next date and the respondent bank will not take any prejudicial steps against the petitioner,” Justice Najmi Waziri ruled in the matter of Bank of Baroda.

While in the matter of Punjab National Bank the court asked the lender to maintain status quo until the next hearing but clarified that the bank was free to issue a show-cause notice to the petitioners and allow them a hearing through video conferencing.

The Delhi high court passed the orders on 11 and 14 August. While the August 11 order pertains to PNB’s classification of the two companies as fraud, the August 14 rulings are in cases against Bank of Baroda.

While former attorney general of India Mukul Rohatgi appeared for the petitioners Reliance Home Finance and senior advocate Parag Tripathi was counsel for Reliance Commercial Finance. Senior advocate Amit Chaddha is representing Bank of Baroda and Rajesh Gautam is representing Punjab National Bank.

The counsel for the two ADAG companies claimed that unilaterally declaring them fraudulent was against principles of natural justice.

“The petitioners ought to have been heard before any precipitate measures were taken against them,” Rohatgi argued. “The categorisation has caused not only immense distress to the petitioner but also a loss of corporate reputation.”

The petitioner also claimed that the lenders did not submit the Grant Thornton report on which they had relied upon to declare the two companies fraudulent and further submitted that they were aggrieved as being categorised as fraud without being granted due prior opportunity of being heard.

Chadha the counsel for Bank of Baroda argued that while the RBI circular does contemplate administrative hearing for wilful defaulters no such hearing is allowed when accounts are declared fraud. The RBI master directions pertaining to classification and reporting of frauds do not contain any provision of issuance of show-cause notice or affording a hearing to the affected party.

The petitioner also submitted that SBI had appointed a forensic auditor MK Aggarwal & Co, who had found nothing incriminating against the company.


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