Punjab and Sind Bank directed to reissue Show Cause Notice with an opportunity for personal hearing, reinforcing principles of natural justice.
In a significant ruling on March 25, 2026, the Delhi High Court set aside the classification of Devang Pravin Mody's account as 'fraud' by Punjab and Sind Bank, citing improper service of the Show Cause Notice (SCN). The judgment, delivered by a division bench consisting of Justices Prathiba M. Singh and Madhu Jain, underscores the importance of adhering to the principles of natural justice before taking adverse actions.
The case was initiated when Devang Pravin Mody, a former key managerial personnel of Reliance Commercial Finance Limited (RCFL), contested the classification of his account as fraudulent under the Reserve Bank of India's (RBI) Master Directions on Fraud Risk Management. The petitioner argued that the SCN, dated October 29, 2025, was never delivered to him, thus denying him the opportunity to respond and defend himself.
The High Court noted that the SCN was sent to an incorrect address and was returned undelivered, which the bank acknowledged in the impugned order dated February 18, 2026. This misstep led to the classification of Mody's account as fraud, a decision that the court found to be in violation of natural justice principles. Consequently, the court set aside the impugned order and directed the bank to reissue the SCN to Mody's correct address and contact details.
Justice Singh emphasized that affected parties must be given a fair chance to respond to SCNs, aligning with numerous Supreme Court decisions that uphold the right to be heard. The court also directed that a personal hearing be granted to Mody following the submission of his reply to the reissued SCN.
The ruling also addressed the petitioner's responsibility to keep the bank updated with his current address and contact details to avoid similar issues in the future.
This decision is set against the backdrop of ongoing scrutiny of RBI's Master Directions by the Supreme Court, particularly in cases concerning fraud classification and procedural fairness. The Delhi High Court's judgment reiterates the necessity for banks to ensure due process is followed meticulously, safeguarding the rights of individuals and upholding the integrity of financial regulations.
Bottom Line:
A Show Cause Notice (SCN) must be properly served to the concerned party before any adverse action is taken, ensuring compliance with principles of natural justice.
Statutory provision(s):
- Constitution of India, Article 226
- Banking Regulation Act, 1949, Section 35A
- RBI Master Directions on Fraud Risk Management
- Principles of Natural Justice
This ruling serves as a reminder of the judiciary's role in maintaining checks and balances on regulatory and financial institutions, ensuring that procedural lapses do not compromise individual rights.
Devang Pravin Mody v. Reserve Bank of India, (Delhi)(DB) : Law Finder Doc id # 2874728
