Rajratan Babulal Agarwal vs State Bank of India

Reserve Bank of India, set up under the Reserve Bank of India Act, 1934 having its office at 16^th Floor, Central Office Building, Shahid Bhagat Singh Marg Mumbai- 400 001 …..Respondents

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WITH

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WRIT PETITION NO. 3747 of 2024

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Honest Derivatives Pvt. Ltd. 10/868, Koik Building, Vardhaman Chowk, Ichalkaranji Kolhapur, Maharashtra-416 115

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Rajratan Babulal Agarwal 10/868, Koik Building, Vardhaman Chowk, Ichalkaranji Kolhapur, Maharashtra-416 115

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Nidhi Rajratan Agarwal 10/868, Koik Building, Vardhaman Chowk, Ichalkaranji Kolhapur, Maharashtra-416 115

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Vs.

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State Bank of India Stressed Assets Resolution Group, Corporate Centre, 2^nd Floor, The Arcade World Trade Center, Cuffe Parade, Mumbai-400 005

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Reserve bank of India set up under the Reserve Bank of India Act, 1934 having its office at 16^th Floor Central Office Building, Shahid Bhagat Singh Marg Mumbai- 400 001 …..Respondents

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Mr. Ranjeev Carvalho, with Mr. Aadil Parsurampuria, Mr. Tejas Agarwal, Ms. Hanishi Shah, i/b IC Legal for the Petitioner. Mrs. Rathina Maravarman (through VC), with Mr. Dheer Sampat, for Respondent No.1-State Bank of India.

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Mr. Prasad Shenoy, with Ms. Aditi Phatak, Ms. Kirti Ojha i/b BLAC Co, for Respondent No.2-RBI.

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CORAM : REVATI MOHITE DERE &

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DR. NEELA GOKHALE, JJ. DATE : 28^th MARCH 2025.

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P.C.:-

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The Petitioners in Writ Petition No.3745 of 2024 are the

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Managing Director and former Non-Executive Director respectively of

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Shri Tradco India Private Limited (‘STIPL’). The Petitioner No.1-Shri

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Rajratan Babulal Agarwal in Writ Petition No.3745 of 2024 is also the Managing Director of the Petitioner No.1-Company in Writ Petition No.3747 of 2024 namely, Honest Derivatives Private Limited. The Petitioner No.2-Ms. Nidhi Agarwal in Writ Petition No.3745 of 2024 is also a Non-Executive Director of Honest Derivatives Private Limited, which is Petitioner No.1 in Writ Petition No.3747 of 2024. The challenge in both the Petitions is identical with Mr. Rajratan Agarwal, being Managing Director of both the companies and hence, the Petitions are being disposed off by this common judgment and order.

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It is the grievance of the Petitioners in both the Petitions that the impugned order is passed in complete breach of principles of natural justice, firstly, as a copy of the Forensic Audit Report (‘FAR’) was not given to them and secondly, the Petitioners state that they were not afforded a personal hearing before passing the impugned order. Thus, the Petitioners say that the said order is contrary to the directions given by the Apex Court in the case of State Bank of India v. Rajesh Agarwal & Ors.¹ as well as the latest RBI’s Master Circular.

1 (2023) 6 SCC 1

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Mr. Ranjeev Carvalho, learned counsel appears for the Petitioners in both Petitions and Ms. Rathina Maravarman, appears for the Respondent-State Bank of India (‘SBI’). Mr. Prasad Shenoy represents the Reserve Bank of India (‘RBI’).

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During the course of arguments in the matter, it transpired that admittedly, the Respondent - SBI had failed to furnish a copy of the FAR, on the basis of which the Petitioners’ accounts were classified as ‘fraud’. So also, they were not afforded a personal hearing before the impugned order dated 28^th February 2024 was passed. Thus, it is clear that the directions issued by the Apex Court in Rajesh Agarwal (Supra) have not been followed by the SBI. Similarly, the SBI has not acted in aide of the RBI’s Master Circular.

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Mrs. Maravarman was unable to demonstrate that the FAR copy was furnished to the Petitioners. In these circumstances, we deem it appropriate to quash and set aside the order dated 28^th February 2024 issued by the Respondent-State Bank of India. The said order is accordingly, quashed and set aside.

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Needless to state, that the Respondent-State Bank of India

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shall be at liberty to initiate fresh proceedings against the Petitioners herein by adhering to the directions issued by the Supreme Court in Rajesh Agarwal (Supra) and RBI’s Master Circular applicable in this regard.

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Needless to also, state that all consequential actions initiated by the Respondents pursuant to the order dated 28^th February 2024 shall also stand quashed. At this stage, Mr. Carvalho informs us that there is a Look Out Circular (‘LOC’) issued at the behest of the Respondent-State Bank of India against the Petitioners. It is made clear that the Petitioners are at liberty to initiate appropriate proceedings before a Court of competent jurisdiction seeking to quash the said LOC.

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It is also made clear that we have not heard the matter on merits of the show-cause notice issued by the State Bank of India and as such, all contentions of all the parties are kept open to be agitated in appropriate proceedings.

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