HYDERABAD: A division bench of the Telangana High Court on Monday reserved its judgment in batch petitions filed by Rajesh Agarwal of BS Company and other borrowers challenging the Reserve Bank of India’s master circular asking all the banks to declare suspicious bank accounts as fraud accounts.
The BS company's managing director also challenged the action of the State Bank of India in declaring his bank account as a fraud account. On an earlier occasion, the bench, in its interim order, directed the authorities concerned not to take any coercive steps against the petitioners until further orders.
During the course of hearing before the bench of Chief Justice Raghvendra Singh Chauhan and Justice B Vijaysen Reddy, RBI counsel B Nalin Kumar contended that the RBI master circular was issued for the purpose of tackling the ongoing loan frauds and also to alert the member banks.
The RBI's objective is to alert the investigating agencies and prevent frauds. The circular was brought in with an express purpose to discourage fraudsters who dupe various banks by raising loans above Rs 50 crore.
There is no need to issue any notices to those who dupe the banks. An account will be declared as a fraud account only after examining the reports of lenders and the principles of natural justice will not be applicable to such fraudsters, he argued.
Intervening, the bench asked the RBI counsel whether the impugned circular deprives the borrowers of an opportunity of hearing under the principles of natural justice. In reply, Nalin Kumar said that the persons who defrauded the banks in an unnatural way, need not be given any opportunity under the principles of natural justice.
Earlier, senior advocate Mukul Rohatgi, appearing for Rajesh Agarwal, questioned the validity of the RBI circular. Declaring a bank account as fraud without giving an opportunity of any hearing is against the principles of natural justice, he argued. Concluding the arguments, the bench reserved its order in the case.