Court mandates provision of forensic audit documents to ensure compliance with principles of natural justice
In a significant ruling, the Calcutta High Court has set aside the fraud declaration by Indian Overseas Bank against Hemant Kanoria, asserting the violation of the principles of natural justice. The court directed the bank to provide all relevant documents, including the forensic audit report, to the petitioners, Hemant Kanoria and another party, to enable them to effectively respond to the show cause notices issued by the bank.
The case, presided over by Justice Krishna Rao, revolved around the petitioners' challenge to the show cause notices dated February 28, 2025, which proposed declaring their account as "fraud." The petitioners argued that the notices were issued without jurisdiction and in violation of natural justice principles, as they did not receive the forensic audit report or other pertinent documents forming the basis of the allegations.
Represented by Senior Advocates Ratnanko Banerjee and Jishnu Chowdhury, the petitioners contended that without access to the forensic audit report and supporting documents, they were unable to appropriately respond to the allegations. The court, referencing prior judgments, emphasized that the principles of natural justice necessitate the provision of all documents relied upon in the show cause notices to the noticee.
The court directed Indian Overseas Bank to supply the requested documents within two weeks and allow the petitioners to inspect them if they are voluminous. Following the provision or inspection of documents, the petitioners have been granted two weeks to file a supplementary reply to the show cause notices. The bank is then required to make a decision within two weeks upon receipt of the supplementary reply.
This judgment reinforces the importance of adhering to natural justice principles, even in summary procedures such as fraud declarations under the Reserve Bank of India Master Directions, ensuring that the accused have a fair opportunity to rebut allegations.
Bottom Line:
Show Cause Notices - Compliance with principles of natural justice requires the provision of all relevant documents forming the basis of allegations for effective response by the noticee.
Statutory provision(s):
Reserve Bank of India Master Directions, Principles of Natural Justice
Hemant Kanoria v. Indian Overseas Bank, (Calcutta) : Law Finder Doc id # 2851394
