Clipped from: https://www.business-standard.com/industry/banking/sbi-seeks-clarification-on-fraud-classification-of-borrowers-judgment-123041600625_1.html
Seeks exemption from sharing complete forensic audit report
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State Bank of India has filed an application before the Supreme Court seeking clarifications on the apex court’s recent directive that banks hear defaulters before they classify a loan account as fraud.
In its plea filed on April 13, SBI has said: “On a purposeful reading of the judgment, this Court has not read any personal hearing. However, it is likely to be misconstrued and a spate of litigation is apprehended on this ground by those defaulters. Their default has substantially contributed to the weakening of the financial position of the banks, affecting the economy of the nation.”
The bank has sought to limit the scope of “personal hearing” by suggesting that lenders should be allowed to share only relevant extracts of the forensic audit report with the borrower, instead of the full report. It claimed that giving an opportunity to the borrower to make a representation based on the relevant extracts of the audit report is the only possible and practical way of compliance with the principles of natural justice.
SBI has suggested that banks be exempted from handing over the complete forensic audit report to the borrower as it would hamper future investigation and forewarn the borrower by way of disclosure of confidential information.
“The disclosure of the entire material against the borrower, at this stage, would give an opportunity to the borrower to delay the investigation, destroy the evidence and abscond the country,” it has argued.
SBI, in its plea, has also appealed that application of the March 27, 2023, judgment be made prospective in operation, and should not apply to past cases.
It has also pleaded that lenders be allowed to decide the time frame of the adjudication, as the borrowers may try to delay the process in the name of a personal hearing and absence of a time limit stipulation.
At the outset, it is said that the applicant is not seeking a review of the judgment.
The application is likely to be heard next week.
The Supreme Court stated a borrower should be allowed to be heard before a bank declared the person’s account “fraudulent”. The Bench of Chief Justice of India D Y Chandrachud and Justice Hima Kohli upheld the judgment of the Division Bench of the High Court of Telangana on December 10, 2020.
The RBI’s 2016 circular on fraud classification was challenged by over 100 companies in the apex court.
What SBI wants:
1. It seeks limiting the scope of personal hearing
2. Be allowed to sharing only relevant extracts of forensic audit report with borrower
3. Lenders be allowed to decide time frame of adjudication
4. SC’s March 27 judgment be made prospective in operation, and should not apply to past cases