Delhi High Court Dismisses PIL Alleging Financial Impropriety in Commercial Transactions

Court cautions against speculative PILs, affirms banking discretion in commercial decisions.  

The Delhi High Court, in a significant ruling, dismissed a Public Interest Litigation (PIL) filed by Infrastructure Watchdog against the Union of India and other respondents, which alleged undervaluation and financial impropriety in commercial transactions involving public sector banks. The Division Bench, comprising Justices C. Hari Shankar and Ajay Digpaul, underscored the importance of exercising caution in entertaining PILs that are speculative in nature, particularly those challenging commercial decisions of financial institutions without substantial evidence of wrongdoing.

The case centered around allegations that the Hyatt Regency Hotel, owned by Asian Hotels (North) Pvt Ltd (AHN), was undervalued during One Time Settlement (OTS) negotiations with the Bank of Maharashtra (BOM) and the Punjab National Bank (PNB). The petitioner contended that this undervaluation led to a significant loss to the public exchequer.

The court meticulously examined the facts presented and concluded that the PIL was speculative and lacked credible evidence to substantiate claims of financial misconduct. It emphasized that courts should not interfere in bona fide commercial decisions taken by banks, as such interference could disrupt the economic infrastructure and demoralize financial institutions.

The Bench noted that multiple valuation reports were considered by the banks before approving the OTS proposals, and the decisions were made following a thorough review process involving independent committees. The court highlighted the importance of allowing regulatory bodies to address such transactions, rather than invoking judicial review, which could lead to unwarranted inquiries and harm to banking operations.

Furthermore, the judgment reiterated the requirements under the Delhi High Court (Public Interest Litigation) Rules 2010, emphasizing the need for meaningful disclosure of the source of information in PILs. The court found the petitioner's reference to a "reliable whistle blower" insufficient under these rules.

In dismissing the PIL, the court stressed that frivolous allegations could have serious ramifications for the banking sector and warned against misuse of the judicial process for speculative purposes. The court's decision reinforces the principle that judicial intervention in commercial matters should be based on clear evidence of irregularity or corruption.

Bottom Line:

Public Interest Litigation - Courts should exercise caution in entertaining PILs based on speculative allegations related to commercial transactions, especially involving financial institutions, as unwarranted inquiries can cause harm to the banking and economic infrastructure.

Statutory provision(s):  

• - Article 21 of the Constitution of India  
• - Rule 9(i)(c) of Delhi High Court (Public Interest Litigation) Rules 2010  

Infrastructure Watchdog v. Union Of India, (Delhi)(DB) : Law Finder Doc Id # 2803498