Supreme Court Deliberates on Mandatory Hearings in Fraudulent Account Declarations

RBI to be Impleaded in Ongoing Case Between State Bank of India and Amit Iron Private Limited

In a significant development, the Supreme Court of India, on November 4, 2025, addressed the crucial question of whether banks are obligated to provide an oral or personal hearing before declaring an account as fraudulent. The case, State Bank of India v. Amit Iron Private Limited, has drawn attention due to its potential implications for banking and financial laws.

Presided over by Justices J.B. Pardiwala and K.V. Viswanathan, the court heard extensive arguments from both sides. Representing the State Bank of India, Solicitor General Mr. Tushar Mehta argued against the mandatory provision of oral or personal hearings, citing practical contingencies that banks might face. He emphasized that in some situations, offering a personal hearing could undermine the very purpose of declaring an account fraudulent.

Conversely, Mr. K. Parameshwar, senior counsel for the respondents, contended that the necessity for oral or personal hearings is well established by the Supreme Court's earlier judgment in State Bank of India v. Rajesh Agarwal (2023). He argued that merely calling for a reply to a show cause notice is insufficient, underscoring the importance of a personal hearing in such cases.

Acknowledging the complexities involved, the Supreme Court has directed the Reserve Bank of India (RBI) to be impleaded as a party respondent to effectively address the issues. The court has also asked the parties to submit written arguments, including relevant case laws and particular contingencies that might exempt banks from providing personal hearings.

This case will be revisited on November 18, 2025, with the court insisting on concluding the hearing on that date. The involvement of the RBI highlights the significance of the case and its potential impact on the handling of fraudulent accounts in the banking sector.

Statutory provision(s): Banking and Financial Laws, Reserve Bank of India regulations.

State Bank of India v. Amit Iron Private Limited, (SC) : Law Finder Doc Id # 2804531