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2024 (2) TMI 364 - HC - Indian LawsDeclaring the account as "Fraud" - Violation of principles of natural justice (audi alteram partem) - Validity of decision of the respondent banks taken in the Joint Lenders Meeting dated 29.09.2020 declaring the account of M/s Syntex Industries Limited (Company) as fraud - opportunity to deal with the forensic audit report and/or the supplementary forensic audit report not provided - HELD THAT:- Rule of audi alteram partem has been read into clauses 8.9.4 and 8.9.5 of the Master Directions of 2016 on frauds. The Apex Court in State Bank of India and Others v. Rajesh Agarwal and Others [2023 (3) TMI 1205 - SUPREME COURT] has also directed that 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 coupled with passing of a reasoned order on the objections addressed by the borrower. Undisputedly, in the present case, no such steps have been taken by the respondent lender banks and therefore, on this limited ground of violation of principles of natural justice, the decision of the respondent banks declaring the account of the company as fraud is hereby quashed and set aside. The matter is remitted and let the respondents concerned, after furnishing the copies of the forensic audit report and supplementary forensic audit report so also reasonable opportunity to the petitioners to submit the representation, complete the proceedings by passing order. The petition stands partly allowed.
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