Kolkata, July 5 -- The Calcutta High Court has quashed a show-cause notice issued by the State Bank of India proposing to classify businessman Monoranjan Roy's loan account as fraudulent, holding that the bank relied on an inconclusive forensic audit prepared without access to the borrower's complete financial records.
Justice Krishna Rao observed that the forensic audit itself acknowledged it had been conducted with only limited documents supplied by lenders and that complete financial records were unavailable. The court held that such a report could not form the basis for initiating fraud classification proceedings, particularly when the auditor had expressly stated that its conclusions were subject to further findings after obtaining the remaining records.
The dispute arose after SBI issued a show-cause notice asking Roy to explain why his account should not be reported as fraud under the Reserve Bank of India's guidelines. Roy challenged the notice, contending that records of Pincon Spirit Ltd., where he was associated, had been seized by the Directorate of Economic Offences during an investigation, making it impossible to produce several documents sought during the audit. He also argued that the bank had withdrawn an earlier notice and issued a fresh one without explaining the reason.
The court noted that the company had already entered liquidation under insolvency proceedings, with a liquidator taking custody of its books of accounts and financial records. It held that, in such circumstances, any forensic auditor should seek documents through the liquidator, who is responsible for preserving and supplying company records, while any clarification from the suspended management must also be routed through the liquidator to maintain the integrity of the process.
Setting aside the notice, the court clarified that its order would not prevent the bank from taking appropriate steps against the petitioner in accordance with law.
Published by HT Digital Content Services with permission from Millennium Post.