The Bombay High Court on Friday expressed dissatisfaction with the routine practice among banks of declaring accounts as ‘fraud’ or ‘defaulter’ in a mechanical “cut, copy, paste” manner, and directed industrialist Anil Ambani to file a complaint with the Reserve Bank of India (RBI). The directive came during a hearing of a petition by Ambani challenging the Union Bank of India’s decision to label his loan account as ‘fraud.’
Justices Revati Mohite Dere and Neela Gokhale, presiding over the case, noted the absence of due process in how the Union Bank of India handled Ambani’s account designation, including the lack of a prior hearing and the bank’s failure to provide documentary evidence used in their decision-making process.
Highlighting a broader issue, the court observed that such indiscriminate labeling not only affects the individuals concerned but also mishandles public funds, necessitating stricter oversight and adherence to RBI guidelines. “There has to be some application of mind,” the bench remarked, emphasizing the need for banks to follow the structured guidelines laid out in the RBI’s ‘master circulars.’
The court suggested that the continued occurrence of these issues could be mitigated by the RBI implementing mechanisms to hold bank officials accountable and to ensure that proper checks and balances are in place. “There has to be some checks and balances, otherwise this will go on,” the court cautioned.
Senior counsel Venkatesh Dhond, representing the RBI, informed the court that individuals aggrieved by such bank orders have the option to lodge online complaints with the RBI, which would then assess whether the bank followed due process, though not the merits of the case itself.
Accepting this procedure, the court instructed Ambani to proceed with filing his complaint with the RBI. In addition, the court ordered the Union Bank of India to submit an affidavit responding to Ambani’s allegations and scheduled the next hearing for March 13.
