HC says civil debt cannot be declared fraud account

Hyderabad: Justice S. Nanda of the Telangana High Court on Wednesday suspended the classification of businessman Rajesh Agarwal’s account as a fraud account.

The judge made an interim order in a writ plea filed by Rajesh Agrawal of BS Limited questioning the action of Bank of India in reducing a show cause notice into an empty formality. This was the second round of litigation for the petitioner.

Earlier, a division bench of the High Court held that declaring an NSC account as fraud has far-reaching legal and civil consequences. Therefore, the bench ruled that it is imperative to follow principles of natural justice. The said order was reiterated by the Supreme Court.

Senior counsel L. Ravichander, appearing for the petitioner, pointed out that the bank had automated its process of declaring the petitioner's account as a fraud account. He said that such civil debt cannot be a mere formality. He pointed out to the court the far-reaching consequence for such a declaration. He said that the petitioner’s request for time as the relevant documents were unavailable was not even addressed by the bank while passing the impugned order.