The Supreme Court on Friday said the Reserve Bank of India and banks can proceed afresh against big defaulters even as it set aside orders of various high courts that quashed criminal proceeding initiated against such borrowers and also stalled actions taken by the lenders for declaring their accounts as frauds.
“Setting aside of an administrative action on the grounds of violation of the principles of natural justice does not bar the administrative authorities from proceeding afresh,” a Bench comprising M.M.Sundresh and Rajesh Bindal said.
It said that high courts across the country exceeded their jurisdiction when they quashed FIRs and the subsequent criminal proceedings initiated against borrowers whose accounts had been declared fraudulent without any challenge being made to such declaration.
The apex court said that an administrative action, such as by RBI and banks, and a criminal proceeding stand on different footings. A first information report, by taking cognizance of an offence, merely sets the law into motion, it said, adding this has nothing to do with a decision on the administrative side, made by a different authority.
“Merely because the facts are same or similar, one cannot say that in the absence of a valid administrative action, no offence which is otherwise cognizable, can be registered,” the judgment stated.
Therefore, even assuming that there is no action forthcoming on the administrative side, a FIR can be held to be maintainable, the judges said, adding that the scope and role of both the actions are totally different and distinct, more so when undertaken by different statutory or public authorities.
The apex court said the FIRs were "erroneously" quashed in certain cases where no opportunity of being heard was given to the Central Bureau of Investigation or where the probe agency was not even made a party to the matter.
The Supreme Court had in 2023 held that a lender is bound to give an opportunity of personal hearing to a borrower before classifying its account as fraudulent as per the Master Circular of July 1, 2016.
Classification of accounts as fraud results in civil consequences for borrowers and amounts to blacklisting of borrowers, hence opportunity of hearing must be granted for the borrowers, it had said, while asking RBI and lenders to include priniciples of natural justice in circular in order to give an opportunity to the affected party/person to present their case.
Pursuant to the SC judgment, the HCs across the country had not only quashed the declaration of borrower’s account as fraud, but also the FIRs and criminal proceedings filed against them.
“Setting aside of an administrative action on the grounds of violation of the principles of natural justice does not bar the administrative authorities from proceeding afresh,” a Bench comprising M.M.Sundresh and Rajesh Bindal said.
It said that high courts across the country exceeded their jurisdiction when they quashed FIRs and the subsequent criminal proceedings initiated against borrowers whose accounts had been declared fraudulent without any challenge being made to such declaration.
The apex court said that an administrative action, such as by RBI and banks, and a criminal proceeding stand on different footings. A first information report, by taking cognizance of an offence, merely sets the law into motion, it said, adding this has nothing to do with a decision on the administrative side, made by a different authority.
“Merely because the facts are same or similar, one cannot say that in the absence of a valid administrative action, no offence which is otherwise cognizable, can be registered,” the judgment stated.
Therefore, even assuming that there is no action forthcoming on the administrative side, a FIR can be held to be maintainable, the judges said, adding that the scope and role of both the actions are totally different and distinct, more so when undertaken by different statutory or public authorities.
The apex court said the FIRs were "erroneously" quashed in certain cases where no opportunity of being heard was given to the Central Bureau of Investigation or where the probe agency was not even made a party to the matter.
The Supreme Court had in 2023 held that a lender is bound to give an opportunity of personal hearing to a borrower before classifying its account as fraudulent as per the Master Circular of July 1, 2016.
Classification of accounts as fraud results in civil consequences for borrowers and amounts to blacklisting of borrowers, hence opportunity of hearing must be granted for the borrowers, it had said, while asking RBI and lenders to include priniciples of natural justice in circular in order to give an opportunity to the affected party/person to present their case.
Pursuant to the SC judgment, the HCs across the country had not only quashed the declaration of borrower’s account as fraud, but also the FIRs and criminal proceedings filed against them.
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