Clarifying its position on its March 27 judgement, the Supreme Court on Friday said it had not directed banks to personally hear the borrower before declaring his account as ‘fraud’.
The court has given this clarification on behalf of the State Bank of India (SBI) on two points present in the order of March 27. A bench comprising Chief Justice DY Chandrachud, Justice PS Narasimha and Justice JB Pardiwala said, ‘We have never said that the borrowers should be given a chance to represent themselves personally. We had said that they should be given a chance to present their side by giving proper notice.
On the issue of retrospective effect of its previous order, the bench said that at this point, SBI will have to file a review petition against the decision. A bench headed by the Chief Justice had said in one of its judgments on March 27 that if an account is declared a fraud, not only will its information be given to the investigating agencies, but the borrower will also have to face penal and civil cases.
Verdict given on SBI’s petition
On March 27, a bench of Chief Justice Justice DY Chandrachud and Justice Hima Kohli said that declaring accounts as frauds also has adverse effects on the lives of borrowers. The bank should give them an opportunity of being heard before classifying their accounts as fraud under the Fraud Guidelines. This decision came on a petition by the State Bank of India.
RBI’s 2016 Master Circular on ‘Fraud Classification and Reporting by Commercial Banks and Select FIS’ was challenged before various High Courts. It had asked banks to be cautious of big loan defaulters. RBI had said that banks should declare such accounts as fraud if found suspicious.
Know what was the matter
SBI had filed a petition in the Supreme Court against a decision of the Telangana High Court. The Telangana High Court had ruled in the year 2020 on Rajesh Aggarwal’s petition that before declaring any account as a fraud, the account holder should get an opportunity of hearing.
