The Supreme Court has permitted the RBI and banks to restart proceedings against major defaulters, overturning earlier high court rulings that had stayed criminal actions and the classification of borrowers’ accounts as 'fraud'.
The Court stated that overturning an administrative action for violating natural justice does not bar authorities from initiating fresh action. It held that high courts exceeded their limits by quashing FIRs and criminal proceedings based solely on the classification of borrower accounts as fraudulent without direct challenge.
The Court clarified that the administrative actions of the RBI and banks are separate from criminal proceedings. It emphasized that an FIR is the start of legal action and operates independently of administrative decisions. A valid FIR can be filed even in the absence of administrative actions, underscoring the distinct roles of each process.
The bench, comprising Justice M.M. Sundresh and Justice Rajesh Bindal stated, “We are in full agreement with the submission made on behalf of the Appellant-CBI that the High Courts exceeded their jurisdiction by quashing the FIRs and the subsequent criminal proceedings, despite no challenge being made to the same. Further, the same have been erroneously quashed in certain instances, either where there was no opportunity of being heard afforded to the AppellantCBI (respondents before the High Courts), or where the Appellant-CBI was not even impleaded as a party-respondent before the High Courts.”
“We set aside the impugned judgments and remit the matters in their original form to the High Court for fresh consideration on all issues, except the one issue which has been decided by us in these appeals. Needless to state that the FIRs and the subsequent criminal proceedings which have been quashed will also stand restored in their original form. We request the High Courts to make an endeavour to dispose of the matters being remitted within a period of 4 months from the date of passing this judgment, after affording an opportunity of hearing to all the concerned parties.” the Bench added.
The Supreme Court clarified that the RBI and complainant banks can initiate fresh proceedings against defaulters, as long as they follow the principles of natural justice.
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