Gautam Malhotra vs IDBI Bank Limited

DHARMESH SHARMA, J. (ORAL)

Allowed, subject to all just exceptions.

The application stands disposed of.

The petitioner is invoking the writ jurisdiction of this Court and is assailing the order dated 26.07.2024 (signed on 05.08.2024) passed by the respondent, whereby the account of the petitioner has been declared as „Fraud‟.

Learned counsel for the respondent is present on advance notice.

Mr. Dayan Krishnan, learned Senior Advocate for the petitioner, has urged that upon receiving the Show Cause Notice [“SCN”] dated 06.02.2024 issued by the respondent, a detailed reply dated 22.02.2024 was submitted, wherein he, inter alia, brought to the fore that he was merely a non-executive Director of the company viz., Metalyst Forgings Ltd. (MFL) during the period of inquiry i.e. 2014-15 and 2015-16. It was pointed out that the company went into CIRP proceedings w.e.f. 15.12.2017, and as a result, the Board of Directors was suspended, and the company was taken over by the IRP/RP. Further, the petitioner, vide reply dated 22.02.2024, sought as many as 14 documents, which are reflected in paragraph (14) of the said reply.

The learned Senior Advocate for the petitioner has further submitted that, although a reply was received from the respondent dated 06.03.2024, none of the documents were supplied. The reply was cryptic, stating „documents sought have not been relied by the bank for examining the account as fraud”, and hence, the same could not be shared‟. It was urged that the aforesaid documents were indeed relied upon by the respondent while issuing the SCN. Additionally, it was pointed out that only the extracts of the Forensic Audit Report conducted by S.P. Chopra & Co. (SPC) at the behest of the State Bank of India & another consortium Bank were supplied.

It was also pointed out that the findings of the aforesaid Forensic Audit Report were reviewed/re-examined by the respondent by appointing K G Somani & Co. LLP (formerly KG Somani & Co.) as Chartered Accountants at the behest of the Union Bank of India, which vide its report dated 18.01.2024, came to the conclusion at page 49 of its report that they had not been „confronted with any transaction or areas of observation in particular leading to any material or factual fraud, diversion or siphoning of funds‟. Relience is placed heavily on decision by the Supreme Court in the case of State Bank of India v. Rajesh Agarwal^{11.(2023) 6 SCC 1}.

Per contra, learned counsel for the respondent vehemently urged that the petitioner is none other than the real nephew of mastermind, Mr. Arvind Dham, who was involved in numerous financial irregularities. He made reference to a decision by the Supreme Court in the case of Jaskaran Singh Chawla v. UOI^{22.2024 SCC OnLine 255}, pointing out that the company in question is a sister concern of M/s. Amtek Auto Limited. The Supreme Court found prima facie evidence of the appointment of dummy directors, the creation of a web of more than 500 companies, misrepresentations in the books, and, more importantly, the diversion and siphoning of loans through related and controlled entities by various means.

It was further urged by the learned counsel for the respondent that the petitioner, vide their reply dated 22.02.2024, sought documents that were neither relevant nor relied upon by the bank when issuing the SCN dated 06.02.2024. It was stated that the bank was always ready and willing to share the complete copy of the Forensic Audit Report and that matter had already been reported to the Reserve Bank of India.

Having heard the learned counsels for the parties, although there is merit in the plea by the learned counsel for the respondent that the petitioner cannot be allowed to conduct a fishing inquiry into all sorts of documents, except to seek copies and examine the documents that have been relied upon by the Bank in passing the impugned order.

A careful perusal of the impugned order dated 26.07.2024 shows that no specific reasons regarding the culpability of the petitioner have been brought out, and the decision against him was taken primarily due to non-submission of an appropriate reply. It is also evident that despite the petitioner seeking an opportunity for a hearing vide letter dated 18.07.20204, the same has not been afforded.

Thus, in light of the aforesaid backdrop, the impugned order dated 26.07.2024 passed against the petitioner cannot be sustained in law. At the same time, the whole process of inquiring into the alleged blemishes committed by the petitioner with regard to the financial irregularities for the year 2014-15 and 2015-16, and in view of the earlier decision by this Court in the case of Atul Kumar Jain v. IDBI Bank Limited^{33.2024 SCC OnLine Del 5022}, the present writ petition is disposed with the following directions:

The present Writ Petition along with pending application stands disposed of accordingly.