Allowed

Mr. Yugandhar Meka v. Union of India

Telangana HC2 Sept 2024WP/31334/2023

Case brief

AI extract

What is this about?

This judgment concerns a writ petition challenging a bank's show cause notice classifying a director's account as fraudulent. The court allowed the petition based on a prior order in an identical case, setting aside the impugned notice and directing the bank to issue a fresh notice complying with guidelines and judicial precedents.

What did the court decide?

Allowed the writ petition; set aside the show cause notice dated 26.10.2023; directed respondents to issue a fresh notice in compliance with RBI guidelines and State Bank of India v. Rajesh Agarwal.

Mr. Yugandhar Meka Vs Union of India — Banking and Recovery | Telangana HC (2024)

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HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction)

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MONDAY, THE SECOND DAY OF SEPTEMBER TWO THOUSAND AND TWENTY FOUR

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PRESENT

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THE HONOURABLE SRI JUSTICE C.V. BHASKAR REDDY

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WRIT PETITION NO: 3't334 OF 2023

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Between:

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Mr. Yugandhar Meka, S/o. Mr.^Ivl. Anjaneyulu,^{Aged72 years, Occ Busine-ss,} R/o Plot 22, Nandagiri Hills, Rd No. 69, Jubilee Hills,^{Hyderabad - 500033,} Telangana.

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...PETITIONER

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AND

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1 Union of lndia, , Rep by its finance secretary,^{New Delhi15, SafdargunlRoad,} New Delhi, - 110001.

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...RESPONDENT No¹

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Reserve Bank of lndia, , Shahid Bhagat^{Singh, Mumbai} -⁴⁰⁰⁰⁰¹

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..,RESPONDENT NO-2

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HDFC Bank limited, At HDFC^{BankHouse, Senapati Bapat Marg, Lower} oarel.^(West). Mumbat^- 400 013 And^{branch office at. H. No. 6-3-24414,3rd} 'Floor, iloxana Palladium, Road No. 1 , Banjara Hills (Besides Virinchi Hospitals), Hyderabad^- 500 034

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..,RESPONDENT^NO,3

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4 Karvy Stock Broking Limited.^{(KSBL) Having its Reg} d offrce at. Karvy Millennium, Plot No. 31/P. Nanakramguda^Flnanclal District, Gachibowli, Hyderabad - 500 032

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RESPONDENT NO.4 ...RESPONDENTS

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Petition under Article 226^{of the Constitution of lndia praying that in the} circumstances stated in the affidavit^{filed therewith,the High Court may be} pleased to issue writ, order or direction and more^{particularly one in the nature of} writ of Mandamus a. Declaring^{the action of the Respondent No.3 Bank in issuing} the Show cause Notice dated^{october26, 2023 againstthe Petitioneras illegal}

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,{,,

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and contrary^{to law as an abuse of authority and process of law b Set aside the} Show Cause^{Noticedated October26, 2023 againstthe Petitioner c'}

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lA NO:^{1oF 2023}

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Petition under^{Section 151 CPC prayingthat in the circumstances statedin} the affidavat^{filed in support of the petition, the High Court may be pleased to stay} all further^{proceedings consequentto the Show Cause Noticedated October26'} 2023 against^{the Petitioner during the pendency of this Petition'}

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Counsel for^{the Petitioner:SRI MANOJ REDDY KESHI REDDY}

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Counsel for^{the Respondent No.1: SRI GADI PRAVEEN KUMAR} DY. SOLICITOR^{GEN. OF INDIA}

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Counsel for the^{Respondent No.3: SRI V ANEESH}

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The Court made^{the following:ORDER}

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HON'BLE SRI JUSTICE C.V.BHASKAR REDDY WRIT PETITION No.31334 of 2023

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ORDER:

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This Writ Petition came to be fiied assailing the validity of the shor,r,' calrse notice dated 26.1O.2O23 issued by respondent No.3 calling for explanation from the petitioner as to why its acccunt should not be classified^as fraud' in terrns of the Master Circulars issued by^the Reserve Bank of India (RBI); as iilegal.^arbitrary, unconstitutiona-l and r,vithout^jurisdiction and for other consequential reliefs.

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It is the case of the petitioner that he^{is a former} Non-Executive Director on tite board of^{Kanrya Stock} Broking Limited, which is registered under the^provisions of the Companies Act, 1956^(for short, "the Act").^{It is the} further case of the petitioner that the^{said company has} availed credit loan benefits from respondent^No.3-bank. The grievance of the petitioner is that respondent^No.3- bank issued the impugned show cause^{notice, dated} 26.1O.2023 to him without following the^{guidelines issued}

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2 CVBRJ wp_l l314-2021

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by the Reserve Bank ol India (RBI) in Master Circular, dated 01.07.2016 and the guidelines issued b,y the Hon,ble Apex Court in the State Bo:nk of Ind.ia v. Rajesh Agarualt.

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This Court has carefully examined the show cause notice, dated 26.1O.2023 issued to the petitioner, wherein it is specifically stated that the respondents have called for explanation from the petitioner after following the guidelines issued by the Hon'bie Apex Court in the case of State Bank of India a. Rajesh Agarutal (cited supra). The petitioner, instead of su'omitting an explanation to the said show cause notice, has filed the present writ petition on the ground that the respondents have not furnished the forensic report, which is the basis for issuance of show cause notice. In the absence of a forensic report being furnished to the petitioner, which is the found ation for issuance of show cause notice, the very show cause notice is illegal arrd the same is in violation of principles of natural justice.

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'^{(zozg) o scc t}

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CVB&J -) Wp_l1334_2023

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Learned counsel appearing^{for the respondentshas} submitted that the^{show causenotice dated26.LO-2023} issued to the^{petitioner herein and others was assailed} before this Court^{in W.P-No.31124of 2023 and this Court,} uide ord.er dated^{25.06.2024aJlowed the same by setting} aside the impugned^{show cause notice dated 26'10'2023} and directing the^{respondentsto issue a fresh notice to the} petitioner therein following^{the guidelines issued by the} Hon'ble Apex Court io^{State Bank of India a' Raiesh} Agarwal (cited supra)^{and atso the guideLires issued by} the RBI ald to^{pass appropriate order in accordance with} law after submitting^{explanationby the petitioner'Since} the very same show^{cause notice is the subjectmatter of} this Writ Petition,^{the issue is squarely covered by the} order passed^by this^{Court in W.P.No.31 124 of 2023'}

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In view of the said^{submission, the Writ Petition is} allowed arrd the^{impugned show cause noticedated} 26.10.2023^{issuedby respondentNo.3 is set aside and the} respondents are^{directed to issue freshshow cause notice} to the petitioner^followingthe Suidelines^{of the Hon'ble} Apex Court in State^{Bank of India a' RaieshAgarwal}

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CYB&J wp_l Ill.t 2013

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(cited supra) and also the guidelines issued by the RBI and call for arr explanation from the petitioner with regard to classification of petitioner,s account as .fraud, ald on receipt of such expranation, the respondents are directed to pass appropriate orders, 1n accordance with law, after affording an oPportunity of personal hearing to the petitioner and communicate a decision to the petitioner within a period of eight weeks from today. There shall be no order as to costs.

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As a sequel, the miscellaneous petitions pending, if any, shall stand closed.

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SD/- K,AMMAJI ASSISTANTT REGTSTRAR //TRUE COPY' ,

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SECTION OFFICER To, 1 #i^li"ir"3r.a"r:retary,^{New Dethii5, safdarsunjRoad, Union of tndra, New} 3,Fir,ifi ,?1j[,][Jxili,:.8^iB:,!lfl ,fr :,.j3:B"Xj$?,,A"lllf,o"1o,"", paret, Floor, Roxana palladium(West). Mumbai _ 4o_o 01 3 And 1 . b;;ili;i+;.'"';l Banjara Hrlls (Beaides H No viin-"ii" 6-3-24414. " "'"3rd ^{Hospitats). Hyderabad} dfio63oN" 4. Karvy Stock Brokino I imit (KSBL) Having its Regd otfice at Karvv o:23 1 /P rv' n [ [-,i g,? ;' ;: ;;;;Y b ti;;i c, it i o 6r i Hi',l"J:'#T -'J3tN " 5. OneCCto Sri Manoi Reddy.Keshi Reddy. Advocate [OPUC] nd a ropUCl : ffi Eg Fjt^x,tist#1",.*iff("i,_";"; ", J

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HIGH COURT

DATED:0210912024

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