Banks Must Hear Borrowers Before Classifying Accounts As Fraud: Supreme Court
NDTV
The Supreme Court said that the principles of natural justice demand that the borrowers must be served notice, given an opportunity to explain the conclusions of the forensic audit report
The Supreme Court on Monday rejected the State Bank of India's appeal, upholding the Telangana High Court's order and ruled that it is reasonably practicable for the lender banks to provide an opportunity for a hearing to the borrowers before classifying their accounts as fraud.
A bench of Chief Justice Dhananjaya Y Chandrachud and justice Hima Kohli uphold the judgment of the Division Bench of the High Court of Telangana dated December 10, 2020. The court set aside the judgments of the High Court of Telangana dated December 22, 2021 and December 31, 2021, and of the High Court of Gujarat dated December 23, 2021.
The top court said that the principles of natural justice demand that the borrowers must be served notice, given an opportunity to explain the conclusions of the forensic audit report, and be allowed to represent by the banks before their account is classified as fraud.
In addition, the decision classifying the borrower's account as fraudulent must be made by reasoned order, the court held.
