The Bombay High Court has quashed the “fraud” classification imposed by Bank of India on the account of Jet Airways founder Naresh Goyal, ruling that the lender failed to follow due process and principles of natural justice before arriving at its decision.
In a detailed order, a division bench of Justices R.I. Chagla and F.P. Dubash held that under the Reserve Bank of India’s Master Directions on Frauds, banks must share the findings of a forensic audit report with borrowers and provide them an opportunity to present their case before designating an account as fraud.
Due process not followed
The court noted that Bank of India issued two show-cause notices to Goyal—first on December 30, 2024, and then on July 1, 2025. However, both fell short of the legal requirements.
- The December notice was issued without sharing the forensic audit report.
- Although the July notice did enclose the audit findings, Goyal was not given a chance to represent his case before the classification.
“The mere re-examination of the earlier classification of the petitioner’s account as fraud does not meet with the rule of audi alteram partem,” the bench observed, citing the Supreme Court’s ruling in Rajesh Agarwal & Ors., which affirms the right to be heard as a fundamental element of natural justice.
Court’s ruling
The judges stressed that the July 1 notice “appears on the face of it to be contrary to the principle of natural justice” and reiterated that any fraud classification must be preceded by strict adherence to the rule of audi alteram partem—Latin for “hear the other side.”
Accordingly, the High Court set aside the July notice and directed the Bank of India not to act on its earlier fraud designation of Goyal’s account. However, the bank has been permitted to issue a fresh notice if it wishes to proceed, provided it complies fully with the requirements of natural justice.
