The Reserve Bank of India (RBI) has advised banks to seek legal remedy in case of a stand-off with the Central Bureau of Investigation (CBI) over matters classified as fraud.
The RBI’s advice was in response to the CBI returning complaints filed by some banks to probe accounts tagged as fraud and where they have already filed an FIR (first information report).
In several cases, the investigative agency has informed the lender that its complaint has been returned because the borrower concerned has not been given an in-person hearing before the account was classified as fraud.
The CBI’s observation stems from a Supreme Court ruling dated March 27, 2023, which said the principle of natural justice demands that every borrower must be served a notice, be given an opportunity to explain the outcome of the forensic audit report, and be given an in-person hearing before declaring the account as fraud.
In the backdrop of the top court’s order, several borrowers accused of fraud and who were probed by the CBI prior to the top court’s order, appealed in court claiming that their lenders had tagged them and their accounts as ‘fraud’ without allowing them a hearing. Subsequently, the Delhi High Court also ruled in favour of the borrowers, saying they should have been given an opportunity to be heard before being tagged as ‘fraud’.
Banks have conveyed to the CBI that the top court’s ruling is prospective and not retrospective. “Several cases returned by the CBI were those where an FIR was filed prior to the Supreme Court ruling and were already tagged as fraud with the Credit Information Bureau,” said a bank executive.
However, the CBI has refrained from probing cases that were tagged as fraud prior to the top court’s March 2023 ruling.
Separately, the CBI has filed a special leave petition before the Supreme Court, appealing to quash orders issued by high courts on the ground that the March 2023 order categorically stated that “no opportunity of being heard is required before an FIR is logged and registered”.
In a letter to the chief executives of state-owned banks dated September 11, the RBI said, “It is advised that banks may similarly consider pursuing appropriate legal remedies so that FIRs registered at their instance by various law enforcement agencies are pursued suitably.”
Lenders are likely to join the CBI in their appeal to the Supreme Court to quash the high court orders, the banker cited earlier said.
