1 APHC010074802025 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Jurisdiction) [3332] TUESDAY, THE 15th DAY OF SEPTEMBER 2026 PRESENT THE HONOURABLE SRI JUSTICE RAVI CHEEMALAPATI WRIT PETITION NO: 3889/2025 Between: M/s Idupulapadu Cotton Mills Pvt Ltd. ...PETITIONER AND The Union Bank Of India and Others ...RESPONDENT(S) Counsel for the Petitioner: 1. PILLIX LAW FIRM Counsel for the Respondent(S): 1. S SATYANARAYANA MOORTHY 2. HARINARAYANA K 3. V DYUMANI The Court made the following order: Aggrieved by action of the 5th respondent in declaring the petitioner’s account as fraud by issuing the impugned proceedings dated 06.02.2025 based on the forensic audit report dated 29.02.2024, the present writ petition is filed. 2. Heard Sri P.Aditya Harsha Vardhan, learned counsel for the petitioner and Sri Om Prakash, learned counsel (appeared in virual mode) representing Sri Harinarayana.K, learned counsel representing R5. 2 3. Learned counsel for the petitioner in elaboration to what has been stated in the affidavit contended that, based on the Forensic Audit report dated 29.02.2024, the 5th respondent-bank has issued the impugned proceedings dated 06.02.2025 classifying the petitioner’s bank account as fraud without issuing a copy of the said forensic audit report dated 29.02.2024 along with the show cause notice and without providing any opportunity to the petitioner to put forth his case, as mandated by the Apex Court in State Bank of India & others Vs Rajesh Agarwal & Ors1 and in violation of fundamental principles of natural justice. In support of his contentions, he relied on the judgment in State Bank of India Vs Amit Iron Private Limited and others2 and the order passed by this court in W.P.No.17724/2024 and accordingly prayed to set aside the impugned proceedings. 4. On the other hand, Sri Om Prakash, learned counsel representing R5 while relying on the contents of the counter affidavit submitted that, since the petitioner failed to maintain loan accounts as per the sanction terms and committed default in repayment of the liability or servicing of interest and has failed to maintain the drawing power, the bank has classified his account as NPA and the bank has appointed forensic auditors for further investigation with regard to the irregularities observed in the loan account. He further submitted that, the respondent bank issued a demand notice under Section 13(2) of the SARFAESI Act, 2002 to the petitioner on 1 2023 6 SCC 1 2 2026 SCC OnLine SC 538 3 31.07.2023 but there was no response from the petitioner and thereafter, a possession notice under section 13(4) of the Act, 2002 was served on the petitioner which was also affixed on the property and published in two newspapers. He further submitted that, the petitioner is informed about deviations made by it vide letter dated 04.07.2024. He further submitted that, since the petitioner did not submit any reply, the respondent bank has referred the matter to the Fraud Monitoring Group to examine the irregularities in the petitioner’s account as per RBI guidelines and thereby, declared the petitioner’s account as fraud through impugned proceedings, as such, the bank has followed the principles of natural justice and in view of the same, the petitioner cannot find fault with the respondent. He further submitted that, as against the impugned order dated 06.02.2025, the petitioner has an alternative remedy of preferring appeal/review before the higher authority of the respondent bank, instead of availing the same, the petitioner has straightaway filed the present writ petition which is not maintainable and accordingly prayed to dismiss the writ petition being meritless. 5. Perused the record and considered the submissions of both the learned counsel. 6. The short point that falls for consideration is that, without serving the forensic audit report dated 29.02.2024 to the petitioner, whether the respondent bank can classify the petitioner’s account as ‘Fraud’ vide impugned proceedings dated 06.02.2025. It is well settled that, if an 4 adjudicatory body is going to rely on any material, evidence or document for its decision against a party, then the same must be brought to his notice and he be given an opportunity to rebut it or comment thereon. If without disclosing any evidence to the party, the authority takes it into its consideration and decides the matter against the party, the decision is vitiated for its amounts to denial of real and effective opportunity to the party to meet the case against him/her. In the present case, the bank has not served the forensic audit report to the petitioner along with the show cause notice which is unsustainable, illegal and arbitrary. Therefore, there is violation of principles of natural justice. Moreover, the judgments relied by the learned counsel for the petitioner is very much applicable to the case on hand. As such, this court is of the firm opinion that the impugned proceedings are exfacie illegal and are liable to be set aside. Accordingly, the writ petition is disposed of. The impugned proceedings dated 06.02.2025 are hereby set aside. However, the respondent authorities are not precluded to take steps in accordance with law. No costs. Miscellaneous applications, pending if any, shall stand closed. ________________________ JUSTICE RAVI CHEEMALAPATI BRS