The Debate Over Borrower Rights: Supreme Court Questions Banks on 'Fraud' Classification

The Supreme Court is questioning banks' reluctance to offer borrowers an oral hearing before labeling their accounts as 'fraud.' Such questioning arises amid a State Bank of India bid against a Calcutta High Court decision. A previous 2023 verdict underscored the significance of offering a fair hearing before making such determinations.

The Supreme Court has challenged banks on the necessity of providing an opportunity for borrowers to be heard before their accounts are classified as 'fraud.' The bench comprising Justices J B Pardiwala and K V Viswanathan articulated the importance of this procedural step.

The inquiry follows an appeal by the State Bank of India (SBI) challenging a Calcutta High Court ruling. The Solicitor General Tushar Mehta, representing SBI, cited a 2023 Supreme Court decision, asserting that oral hearings were not explicitly mandatory in such cases.

Highlighting the principles of natural justice, the top court in 2023 ruled that borrowers should have a reasonable chance to contest and understand the findings of forensic audits before being classified as fraudsters. The SBI has been asked to include the Reserve Bank of India as a respondent with further hearings set for November 18.