Court mandates Canara Bank to provide Aasra Foundations with complete forensic audit report, setting aside fraud declaration.
In a significant ruling, the Punjab and Haryana High Court has upheld the rights of borrowers to access forensic audit reports, directing Canara Bank to supply M/s Aasra Foundations with the complete report. The decision, delivered by a bench comprising Mrs. Alka Sarin and Mr. Ramesh Chander Dimri, emphasizes the necessity of transparency and communication by banks when withholding information due to third-party rights.
The case arose when M/s Aasra Foundations challenged a show cause notice and subsequent order by Canara Bank declaring their account as fraudulent. The foundation contended that the bank's decision was based on a forensic audit report that was never disclosed to them, which they argued was in violation of Reserve Bank of India (RBI) instructions and the Supreme Court’s precedent in State Bank of India v. Amit Iron Private Limited.
The bank justified the non-disclosure by citing third-party rights, but failed to communicate this in the show cause notice or order, as required by law. The court, referencing the Supreme Court judgment, reiterated that while banks can withhold parts of a forensic audit report to protect third-party rights, they must inform the borrower and provide an opportunity to respond.
In the absence of such communication, the court concluded that the borrower is entitled to the complete forensic audit report. Consequently, the High Court set aside the fraud declaration against Aasra Foundations and instructed Canara Bank to furnish all documents referenced in their show cause notice, thereby allowing the petitioners an opportunity to adequately respond.
This ruling reinforces the principle that the supply of forensic audit reports is the rule, with exceptions being rare and strictly regulated. The decision ensures that borrowers are not unjustly deprived of crucial information that affects their rights and reputation.
Bottom line:-
Banking law - Borrower has the right to receive the forensic audit report unless its disclosure affects third-party rights, in which case the bank must communicate this fact and provide an opportunity to the borrower to respond.
Statutory provision(s):
Banking law, Borrower's rights, Supreme Court ruling in State Bank of India v. Amit Iron Private Limited, Reserve Bank of India instructions.
M/s Aasra Foundations v. Canara Bank, (Punjab And Haryana)(DB) : Law Finder Doc id # 2921898
