The Supreme Court of India has ruled that banks must give borrowers an opportunity of hearing before classifying their accounts as fraud. The court observed that such an opportunity is a basic requirement of natural justice.The case in question involved a borrower who had availed of a loan from a bank. The bank had classified the borrower’s account as fraud without giving them an opportunity of hearing. The borrower had then approached the High Court, which had upheld the bank’s decision.
The case then reached the Supreme Court, which held that the bank had acted in violation of natural justice by not giving the borrower an opportunity of hearing. The court observed that the classification of an account as fraud has serious consequences for the borrower, including the potential for criminal proceedings.The court further stated that the borrower has a right to be heard before their account is classified as fraud. The bank must give the borrower a reasonable opportunity of being heard and consider any submissions made by the borrower before taking such a step.
The Supreme Court’s ruling is expected to have far-reaching consequences for the banking sector in India. It highlights the need for banks to follow due process and ensure that borrowers are given an opportunity of hearing before taking any adverse action against them.The court’s decision is also significant because it emphasizes the importance of natural justice in the banking sector. The principle of natural justice requires that a person be given a fair and reasonable opportunity of being heard before any adverse action is taken against them.
Overall, the Supreme Court’s ruling that banks must give borrowers an opportunity of hearing before classifying their accounts as fraud is a significant development in the banking sector. It reinforces the importance of natural justice and due process in the industry and underscores the need for banks to act fairly and transparently when dealing with their customers. It is hoped that this decision will lead to a more robust and fair banking system in India.
Written By- Lakshya Sharma students of 1st year BBA LLB at Vivekananda Institute of Professional Studies affiliated to Guru Gobind Singh Indraprastha University
