Mumbai: The Bombay High Court on Tuesday clarified that it has not, per se, stayed the operation of the Reserve Bank of India (Frauds Classification and Reporting by Commercial Banks and Select FIs) Directions of 2016 (Master Circular) with regard to bank fraud.
A division bench of Justices Gautam Patel and Neela Gokhale, during the hearing on Monday, had directed the banks not to take any further action based on the master circular. It was reported that the HC had stayed the effect of the circular till September 11, when it hears the petitions.
HC: not stayed the operation of the Master Circular, per se
In a detailed nine-page order made available on Tuesday, the bench clarified that it has not stayed the operation of the Master Circular, per se.
The bench said that its order on the Master Circular is restricted only to those actions by the banks or their in-house committees that are inconsistent with a Supreme Court ruling on the issue.
“We have not stayed the operation of the Master Circular (which has not been struck down by the Supreme Court decision). The Supreme Court has only read certain requirements into the Master Circular. It follows, therefore, that actions under the Master Circularconsistent with the Supreme Court judgment and decision may undoubtedly proceed,” the bench said.
This order will continue until September 11, 2023, it added.
Banks can take these actions
The judges said that during the pendency of the order, the banks can take certain actions – rescind, withdraw or cancel any orders already passed under the Master Circular and which may be inconsistent with the Supreme Court judgment.
The court had on Monday clarified that agencies can proceed with ongoing investigations against petitioners on the basis of first information reports (FIRs) since they do not arise from the enquiries conducted under the Master Circular.
“The Supreme Court decision clearly states that no hearing is necessary before filing of FIRs, even if the charge is of fraud accounts. In other words, the investigating agencies are at liberty to file and proceed with FIRs without reference to any findings by the bank under the Master Circular in question. Equally, all remedies available in law to private parties remain unaffected by this order and may be pursued,” the court said.
The HC was hearing petitions challenging the RBI circular that permitted banks to make full use of the Central Fraud Registry for timely identification, control, reporting and mitigation of risks associated with fraud.
The petitioners, including Jet Airways founder Naresh Goyal and his wife Anita, challenged the circular claiming that borrowers were not given a hearing before their accounts were classified as fraudulent as per the circular.
Pointers
Bench says its order on the Master Circular is restricted only to those actions by the banks or their in-house committees that are inconsistent with a Supreme Court ruling
‘Actions under the Master Circular consistent with the Supreme Court judgment and decision may undoubtedly proceed,’ HC says
Banks can rescind, withdraw or cancel any orders already passed under the Master Circular and which may be inconsistent with the SC judgment
HC was hearing petitions challenging the RBI circular that permitted banks to make use of the Central Fraud Registry for timely identification, control, reporting and mitigation of risks associated with fraud
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