The Bombay High Court on Friday expressed concerns about the manner in which banks declare accounts as ‘defaulter’ or ‘fraud’. The court highlighted the ‘cut, copy, paste manner’ of passing such orders and advised industrialist Anil Ambani to approach the Reserve Bank of India (RBI) regarding the Union Bank of India’s decision to label his loan account as ‘fraud’.
A division bench comprising Justices Revati Mohite Dere and Neela Gokhale was hearing a petition from Anil Ambani, who challenged the order dated October 10, 2024, by the Union Bank of India. Ambani claimed he was not granted a hearing prior to the order and that he had requested, but not received, the documents the bank used to make its decision.
The court noted that it frequently encounters cases where banks declare accounts as ‘fraud’ or ‘wilful defaulter’ without adhering to RBI guidelines. It emphasised the need for banks to apply their minds when issuing such orders, as it involves public money, and called for a mechanism to ensure compliance with RBI’s ‘master circulars’.
“There cannot be such cut, copy and paste orders. There has to be some application of mind. Ultimately this is public money. We cannot have such orders passed in such a casual manner. There has to be some mechanism put in place,” the bench said.
The bench remarked that unless the RBI acts against bank officials, these practices will persist, and suggested that checks and balances are necessary. Senior counsel Venkatesh Dhond, representing the RBI, mentioned that individuals can file online complaints with the RBI if they believe a bank order violates natural justice principles.
However, he clarified that the RBI would not assess the case merits, only whether mandatory procedures were followed.
The court accepted Dhond’s statement and instructed Anil Ambani to file a complaint with the RBI. The bench also directed the Union Bank of India to submit an affidavit in response to Ambani’s petition and scheduled the next hearing for March 13.