Court Emphasizes Need for Transparency and Natural Justice in Banking Procedures
In a significant ruling, the Calcutta High Court has set aside a show cause notice issued by the SBI Stressed Assets Resolution Group against Monoranjan Roy, citing the inconclusive nature of the forensic audit report upon which the notice was based. The court highlighted the necessity for transparency and adherence to natural justice principles in the issuance of such notices.
The case, presided over by Justice Krishna Rao, revolved around a show cause notice dated December 2, 2025, which directed Monoranjan Roy to explain why his account should not be classified as fraud according to RBI guidelines. The petitioner, represented by senior advocates Mr. Joydip Kar and Mr. Rudraman Bhattacharyya, contended that the forensic audit report lacked conclusiveness, as it was prepared without crucial borrower documents. They argued that the report was incomplete and could not substantiate the allegations, thus violating natural justice principles.
The court noted that the forensic audit report prepared by R. Dokania and Co. was based on insufficient documentation, as the management of the borrower's company, Pincon Spirit Limited, had not provided necessary financial records. This lack of documentation was attributed to the seizure of records by the Directorate of Economic Offences. The audit report itself admitted the absence of key documents and stated that its conclusions were subject to further findings upon obtaining complete financial records.
The court also referenced past judgments, emphasizing that any adjudication must be transparent and parties involved must be given reasonable opportunities to present their case, aligning with the principles of open justice.
Justice Krishna Rao's judgment underscored that the discretionary power under Article 226 of the Indian Constitution should not typically be used to quash show cause notices unless they are wholly without jurisdiction or illegal. In this instance, the issuance of the notice based on an inconclusive forensic audit report was deemed a breach of natural justice, leading to the quashing of the notice.
The court's decision allows SBI to take appropriate future actions against Monoranjan Roy, provided they adhere to proper legal procedures and ensure the availability of necessary documentation for any forensic audit. The judgment also directs the bank to collaborate with the appointed liquidator and Directorate of Economic Offences to acquire all essential documents for a comprehensive audit if needed.
This ruling reaffirms the judiciary's commitment to ensuring fairness and transparency in banking operations, especially in cases involving significant financial and reputational implications for the parties involved.
Bottom line:-
Show cause notice based on inconclusive forensic audit report quashed; transparency and principles of natural justice emphasized.
Statutory provision(s): Article 226 of the Constitution of India, Principles of Natural Justice, Master Directions on Fraud Risk Management.
Monoranjan Roy v. SBI Stressed Assets Resolution Group, (Calcutta) : Law Finder Doc id # 2933896
