1 2025:CGHC:15919 NAFR HIGH COURT OF CHHATTISGARH AT BILASPUR WPC No. 2160 of 2024 Kamlesh Sinha S/o Mr. Khemlal Sinha Aged About 40 Years R/o Plot No.A 160, Samriddhi Vihar Colony, Bemetara, District- Bemetara, Chhattisgarh. ... Petitioner versus 1 - Reserve Bank of India Regional Office, Subhash Parisar, Mahadevghat Road, Prem Vihar, Daganiya, Sunder Nagar Raipur, District- Raipur, Chhattisgarh. 2 - Indian Overseas Bank Dasthi Chowk, Durg Road, Near Dhara Aaramill, Bemetara, District- Bemetara, Chhattisgarh. 3 - Indian Overseas Bank Head Office At 762/763 IOB Anna Salai, Chennai, Tamil Nadu.- 600002 ... Respondents (Cause-title taken from Case Information System) For Petitioner : Mr. Amrito Das, Advocate For Respondents No.2 and 3 : Mr. P.R. Patankar, Advocate Hon’ble Shri Amitendra Kishore Prasad, Judge Order on Board 04.04.2025 1. Heard Mr. Amrito Das, learned counsel for the petitioner as well as Mr. P.R. Patankar, learned counsel appearing for respondents No.2 and 3. YOGESH TIWARI Digitally signed by YOGESH TIWARI Date: 2025.04.09 09:58:12 +0530 2 2. The instant petition is preferred by the petitioner under Article 226 of the Constitution with the following relief(s):- “i) That, this Hon'ble Court may kindly be pleased to direct the respondent authorities to call for the entire records of the case for kind perusal of this Hon'ble Court. ii) That, this Hon'ble Court may kindly be pleased to direct the respondent authorities to display the category of the petitioner as 'STANDARD instead of LOSSES in the light of final payments made by the petitioner vide Annexure P-1 and also in the light of 'Annexure P-2' whereby the petitioner has already been regularly paying the loan amount. iii) That, this Hon'ble Court may kindly be pleased to issue an appropriate writ or order and direct the respondent no.2 & 3 to pay compensation amount of Rs.25,00,000/- for damaging the reputation of the petitioner and also debarring him from availing the loan facilities from the other financial institutions for his survival. iv) That, any appropriate writ, direction or order may also: kindly be passed in favour of the petitioner, which this Hon'ble court deems fit in the circumstances of the case.” 3. In the instant petition, the petitioner is not challenging any particular order rather is challenging the action on the part of respondent-Bank whereby even after final settlement of three 3 bank loan accounts and making continuous payment of one of the loan account, the status of the petitioner is being shown as “NPA/loss assessed” without given any opportunity of hearing to the petitioner and due to said action on the part of respondent- Bank, the petitioner is facing much difficulties to accesses the loan from other Banks. 4. Brief facts of the case, are that, respondent No.1 is the authority under the Government of India which maintain the affairs of the Banks and respondents No.2 and 3 are the Nationalised Banks, therefore they are instrumentalities of the state and are amenable to the writ jurisdiction. The petitioner is a customer of respondent No.3-Bank and was having four loan accounts in respondent No.2- Branch bearing (i) Account No. 309203510000019, COVID Loan of Rs.1,14,000/- dated 17.07.2020; (ii) Account No. 309233000000057, Cash Credit Loan of Rs.8,00,000/- dated 24.01.2020, (iii) Account No. 309232000000236, KCC Loan of Rs.4,39,000/- dated 01.06.2020 and (iv) Account No. 309203464000023, Housing Loan of Rs. 15,00,000/- dated 12.10.2020. The petitioner was maintaining all his loan accounts without any failure or default on his part except paying some of the installments during COVID-19 period, but same was also adjusted and except the housing loan, other loan facilities which were availed by the petitioner has already been repaid and the accounts have been closed as final payment. The other loan 4 account i.e. Housing Loan is also being maintained by the petitioner continuously till date. 5. It is the case of the petitioner that in the month of January 2022, when the EMI of housing loan was not deducted by the Bank, then petitioner has made a communication through mail and inquired about the issue relating to non deduction of EMI then the authorized officer of the Bank has intimated the petitioner that the EMI system will take care of it. Thereafter when the petitioner applied for business loan facilities in other Banks then this fact first came into the knowledge of the petitioner on the basis of Credit Information Bureau (India) Limited (for short, ‘CIBIL’) report that the loan accounts of the petitioner at Indian Overseas Bank / respondent No.2 has been marked as NPA/loss asset in the month of December 2021 despite making all the payments regularly and it is also came into the knowledge that all loan accounts availed from respondent No.2 was reported as “LOSSES” without giving any intimation or giving opportunity of hearing to the petitioner. 6. Thereafter, petitioner immediately made an application before the respondent No.2-Bank on 03.04.2023 requested the Bank to remove the classification/status from ‘loss assets/NPA’ and restored back his status to ‘STANDARD’ immediately, but the Bank authorities did not responded. As such, the petitioner has again made an application before respondent No.2 on 18.03.2024 5 and prayed the same rebel as made in the earlier application, but till date, no necessary steps has been taken by respondent No.2. 7. Learned counsel for the petitioner submits that the action on the part of respondent-Bank by showing status of the petitioner as ‘LOSSES’ is per se illegal and harming the reputation as well as right of the petitioner to avail the loan facilities from the other final institution. He further submits that before classification of the account as 'LOSSES', no intimation or notice has been given to the petitioner, therefore same is in the violation of principles of natural justice. It has been contended that without giving any opportunity of hearing to the petitioner, the loan accounts of the petitioners be declared as ‘LOSSES’ under the CIBIL, which act to be considered as ‘fraudulent account’ and the same cannot be done without giving opportunity of hearing. Reliance has been placed upon the dictum rendered by the Hon’ble Supreme Court in the matter of State Bank of India and others v. Rajesh Agarwal and others reported in (2023) 6 SCC 1 in support of his contention. 8. On the other hand, learned counsel appearing for the respondent- Bank submitted that though the loan accounts of the petitioner have been closed, but he submits that the purpose for which the loan has been taken, has not been fulfilled. 9. I have heard learned counsel for the parties and perused the documents annexed with the writ petition. 6 10. On a pointed query being made to the learned counsel for the respondent-Bank as to whether any opportunity of hearing was given to the petitioner or not, learned counsel appearing for the respondent-Bank has fairly submitted that opportunity of hearing has not been granted to the petitioner. He has also placed reliance in the matter of Rajesh Agarwal (supra) as relied upon by the learned counsel for the petitioners to contend that the opportunity of hearing is to be granted to the petitioner. He lastly contended that the respondent-Bank be granted liberty to pass appropriate order and to take fresh steps in accordance with law as held in the matter of Rajesh Agarwal (supra). 11. It is well settled that the principal of natural justice are not mere a legal formalities but it constitute substantive obligations that need to be followed by the decision making and adjudicating authorities. There are two fundamentals of natural justice which are entrenched in the Indian jurisprudence i.e. - (i) nemo pudex im causa sua, which means that no person should be a judge in their own cause; and (ii) audi alteram partem, which means that a person affected by the administrative, judicial or quasi judicial action must be heard before a decision is taken. 12. Every authority which has the power to take punitive or damaging action has a duty to give a reasonable opportunity to be heard. An administrative action which involves civil consequences must be made consistent with the rules of natural justice. Civil 7 consequences entail infractions not merely a property or personal rights, but also of civil liberties, material deprivations, and non- pecuniary damages. Every order or proceeding which involves civil consequences or adversely affects a citizen should be in accordance with the principles of natural justice. 13. It is further admitted position that the classification in the category of "LOSSES" has the effect of presenting a person from the privilege and advantage of entering into loss of relationship with the financial institutions for purposes of gains. The fact that disability is created by the classification of LOSSES indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the category of LOSSES. The RBI has the right in take all such measures as are necessary to protect the help of the Banking system. However, any policy decision which contemplates serious civil consequences for arty person will be open to challenge for being arbitrary, if the principles of natural justice are not applied during the process. 14. In the matter of Rajesh Agarwal (supra), the Hon’ble Supreme Court has held as follows :- “95. In light of the legal position noted above, we hold that the rule of audi alteram partem ought to be read in Clauses 8.9.4 and 8.9.5 of the Master Directions on Fraud. 8 Consistent with the principles of natural justice, the lender banks should provide an opportunity to a borrower by furnishing a copy of the audit reports and allow the borrower a reasonable opportunity to submit a representation before classifying the account as fraud. A reasoned order has to be issued on the objections addressed by the borrower. On perusal of the facts, it is indubitable that the lender banks did not provide an opportunity of hearing to the borrowers before classifying their accounts as fraud. Therefore, the impugned decision to classify the borrower account as fraud is vitiated by the failure to observe the rule of audi alteram partem. In the present batch of appeals, this Court passed an ad-interim order restraining the lender banks from taking any precipitate action against the borrowers for the time being. In pursuance of our aforesaid reasoning, we hold that the decision by the lender banks to classify the borrower accounts as fraud, is violative of the principles of natural justice. The banks would be at liberty to take fresh steps in accordance with this decision.” 15. Considering the overall facts and circumstances of the case in the light of the dictum rendered by the Hon’ble Supreme Court in the matter of Rajesh Agarwal (supra), this Court is of the opinion that the impugned classification in respect of all bank accounts of the petitioner being declared as “LOOSES” deserves to be quashed. 9 16. In view of the above, instant petition is allowed and the classification in respect of all the bank accounts of the petitioner declaring as “LOOSES” is liable to be and is hereby set-aside. The respondent-Bank is at liberty to initiate fresh steps in accordance with law, as such, it is further directed to the respondent-Bank to declare all the accounts of the petitioner as ‘STANDARD’ till the fresh decision is taken in this regard. 17. With the above observation and direction, this petition is allowed. 18. - - Sd/- (Amitendra Kishore Prasad) Judge Yogesh