👍SBI files plea in SC seeking clarity on fraud classification judgment – The Hindu BusinessLine

Clipped from: https://www.thehindubusinessline.com/money-and-banking/sbi-files-plea-in-sc-seeking-clarity-on-fraud-classification-judgment/article66744444.ece

SBI has also sought exemption from sharing complete details of the forensic audit report with borrowers under the ‘personal hearing’

State Bank of India has filed a plea in the Supreme Court, seeking clarity on the judgment on fraud classification of borrowers. The apex court had, on March 27, ruled that banks need to grant an opportunity for personal hearing before declaring a borrower account as fraud.

“The present application seeking clarification is required to be filed as there is an apprehension of the said judgment being misconstrued and misapplied in absence of the clarifications which are sought in the present Application,” SBI said in the plea accessed by businessline.

In addition to clarity, SBI has sought exemption from sharing complete details of the forensic audit report with borrowers under the ‘personal hearing’ as it could hamper investigation by law enforcement agencies. Instead, it proposed sharing only relevant extracts of the audit report so as to avoid forewarning fraudulent borrowers and risk information misuse.

“It is likely to be misconstrued and spate of litigation is apprehended on this ground by those defaulters, whose default has substantially contributed to the weakening of the financial position of the banks, thereby affecting the economy of the nation,” it said.

Also read: SBI asks field functionaries to desist from mis-selling of insurance products

The lender also sought that banks be allowed to decide the time frame of the adjudication to avoid delays in the absence of any time stipulation, and that the order be implemented prospectively so as not to impact past decisions.

Over 100 companies had challenged the Reserve Bank of India’s July 2016 circular on ‘Frauds classification and reporting by commercial banks and select FIs’ before several High Courts. The application is likely to heard this week.

Petitioners had argued that current regulatory guidelines do not allow for an opportunity of being heard before an FIR is registered. Further, being classified as ‘fraud’, results in reporting to investigating agencies, has penal and civil consequences and debars the borrowers from accessing institutional finance, effectively blacklisting the borrowers from accessing bank credit.

Setting aside the December 2021 judgments of the Telangana and Gujarat High Courts and upholding the December 2020 judgement of the Telangana High Court, SC said the principles of natural justice demand that borrowers be served a notice, given an opportunity to explain the conclusions of the audit, and be allowed to represent themselves before their account is classified as ‘fraud’ so as “to save them from the vice of arbitrariness”.


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