Siddharth Madanlal Bagrecha v. Reserve Bank of India & Anr.

[Cites 1, Cited by 0] Bombay High Court Siddharth Bagrecha vs Reserve Bank Of India Through Regional ... on 7 August, 2026 Author: B. P. Colabawalla Bench: B. P. Colabawalla 15-wpl-27394-2025.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION (L) NO. 27394 OF 2025 Siddharth Madanlal Bagrecha .. Petitioner Versus Reserve Bank of India and Another .. Respondent Ms. Mehernaz Contractor (through VC) a/w. Ms. Naomi Mehta, for the Petitioner. Mr. Pradeep Mane a/w. Ms. Huzan Bhumgara and Ms. Riddhi Badheka i/b. Desai and Diwanji, for Respondent No.1 (RBI). Mr. Anant B. Shinde i/b. Anant B. Shinde and Co., for Respondent No.2. Digitally signed by MAMTA MAMTA AMAR AMAR KALE KALE Date: 2026.08.11 17:59:07 +0530 CORAM: B. P. COLABAWALLA & FIRDOSH P. POONIWALLA, JJ. DATE: AUGUST 07, 2026 P. C. 1. Rule. Respondents waive service. With the consent of the parties, Rule made returnable forthwith and heard finally. 2. The above Petition has been filed by the Petitioner seeking to challenge the impugned Order dated 11th August 2025 under which the Petitioner has been declared as "fraud" by Respondent No.2 (Bank of India). AUGUST 07, 2026 Mamta Kale 15-wpl-27394-2025.doc The Petitioner was a Director of a company called "Paramshakti Steels Limited" (for short "PSL") which was incorporated on 31st May 1995. The Petitioner was appointed as an Additional Director on 8 th April 2014 and resigned from Directorship on 8th December 2014. The account of PSL with the 2nd Respondent Bank was declared as "NPA" on 30 th September 2016 [i.e. after his resignation]. After this, the NCLT Mumbai, on 3 rd July 2017, admitted PSL into a Corporate Insolvency Resolution Process (for short "CIRP") under Section 7 of the Insolvency and Bankruptcy Code, 2016. The Petition under Section 7 filed before the NCLT was by another Bank, namely Union Bank of India. In the CIRP, an Interim Resolution Professional was also appointed. The total debt due by the company (PSL) was approximately Rs.174.93 Crores out of which Rs.75.19 Crores was the debt payable to the 2 nd Respondent Bank. The 2nd Respondent Bank was, according to the Petitioner, the lead Bank with 42.99% voting share. 3. In the Committee of Creditors (for short "CoC") meeting held on 24th November 2017, the Resolution Professional of PSL requested that a Forensic Auditor be appointed to examine the transactions entered into by the company. The CoC declined to appoint any Forensic Auditor. Thereafter, more than a year later, by a letter dated 4 th December 2018, the 2nd Respondent Bank appointed Batliboi and Purohit, Chartered Accountants, to AUGUST 07, 2026 Mamta Kale 15-wpl-27394-2025.doc conduct a forensic audit of PSL. The period for the forensic audit was from 1 st April 2014 to 4th December 2018 (for short the "Review Period"). This Forensic Audit Report (for short "FAR") was finally furnished by Batliboi and Purohit, Chartered Accountants, to the 2 nd Respondent Bank on 20 th June 2020. It transpires that before the FAR, a successful resolution plan for the revival of PSL was approved by the NCLT in February 2019. 4. Be that as it may, on the basis of the FAR dated 20 th June 2020, and nearly 4 years thereafter, the 2nd Respondent issued a Show Cause Notice dated 4th May 2024 to the Petitioner calling upon him to show cause why he should not be declared as "fraud". On 15 th June 2024, the Petitioner replied to the Show Cause Notice. Thereafter, on 25 th March 2025, the 2nd Respondent Bank furnished a copy of the FAR of Batliboi and Purohi to the Petitioner. In respect thereof, the Petitioner gave another Reply on 17 th April 2025. Thereafter, the impugned Order dated 11th August 2025 came to be passed by Respondent No.2, which is assailed in the present Petition. 5. In this factual background, it is urged before us that the impugned Order passed declaring the Petitioner's account as fraud is wholly unreasoned and does not even take into consideration the submissions and the contentions raised by the Petitioner as to why he should not be classified AUGUST 07, 2026 Mamta Kale 15-wpl-27394-2025.doc as "fraud". The learned Counsel appearing on behalf of the Petitioner submitted that, on identical facts, for another Director of PSL, this Court has already held that the Order classifying the Director as a "fraud" is wholly unreasoned and, therefore, set it aside. In that regard, the learned Counsel appearing on behalf of the Petitioner relied upon the decision of this Court in the case of Vinod Garg, Mumbai Vs. Bank of India and Another (Writ Petition No. 4218 of 2025 decided on 21st July 2026). 6. Relying upon this decision, the learned Counsel for the Petitioner submitted that this Court has already held that the Order passed therein being unreasoned, was quashed. She submitted that, in the present case also, the Order passed against the Petitioner is identical to the Order passed against Mr. Vinod Garg, and therefore, the present Order also ought to be quashed and set aside. 7. Mr. Anant Shinde, the learned Advocate appearing on behalf of the 2nd Respondent Bank, submitted that it is true that the facts of this case are almost identical to the facts in Writ Petition No. 4218 of 2025. He, however, submitted that it is his contention, even in the present matter, that it is incorrect to argue that the impugned Order is unreasoned. According to the learned Advocate, the impugned Order is a reasoned one though the AUGUST 07, 2026 Mamta Kale 15-wpl-27394-2025.doc reasons may not be to the liking of the Petitioner. He, therefore, submitted that the Order cannot be termed as unreasoned and therefore assailed on that ground. 8. We have heard the learned Counsel for the parties and perused the record. It is not in dispute before us that the Master Directions on Fraud Risk Management in Commercial Banks (including Regional Rural Banks) and All India Financial Institutions dated 15th July 2024 ("Fraud Master Circular of 2024") mandates that a reasoned Order shall be served on the persons/entities conveying the decision of the Bank regarding declaration/classification of the account as fraud or otherwise. Such Order(s) must contain relevant facts/circumstances relied upon, the submissions made against the Show Cause Notice and the reasons for classification of the account as fraud or otherwise. In other words, a reasoned Order has to be passed for classifying the account of an entity or a person as a fraud. It is not in dispute before us that the impugned Order passed in the present case is almost identical to the Order passed in the case of another Director, namely Mr. Vinod Garg, and which was the subject matter of Writ Petition No.4218 of 2025. That Writ Petition was allowed and the impugned Order was quashed as it was an unreasoned Order. Once these are the facts before us and which are undisputed, we are clearly of the view that, for the reasons AUGUST 07, 2026 Mamta Kale 15-wpl-27394-2025.doc stated in the Order passed by us in Writ Petition No. 4218 of 2025, even the present impugned Order is unreasoned, and therefore, the impugned Order dated 11th August 2025 is hereby quashed and set aside. 9. At this stage, the learned counsel appearing on behalf of the 2 nd Respondent Bank submitted that since the impugned Order is set aside on the ground that it is wholly unreasoned, the 2 nd Respondent Bank be granted liberty to restart the proceedings from the stage of the Show Cause Notice, take the submissions of the Petitioner into account, and thereafter pass a fresh order which would be a reasoned one. 10. Under normal circumstances, we would have acceded to the request made by the 2nd Respondent Bank. However, in the peculiar facts of the present case, we find that the Petitioner was appointed as an Additional Director on 8th April 2014 and resigned on 8 th December 2014. During the review period (from 1st April 2014 to 4th December 2018), the FAR does not even attribute any fraud to the Petitioner during the period he was a Director. Therefore, in these peculiar facts and circumstances, we are of the opinion that any fraud proceedings against the Petitioner (for the review period) in any event, cannot be sustained. There is also no allegation of fraud against the Petitioner in the FAR. AUGUST 07, 2026 Mamta Kale 15-wpl-27394-2025.doc 11. Considering the peculiar circumstances of the present case, we, therefore, decline to grant any liberty to the 2 nd Respondent Bank from reinitiating proceedings for declaring the Petitioner as fraud for the review period from 1st April 2014 to 4th December 2018 and which forms the subject matter of the FAR given by Batliboi and Purohit, Chartered Accountants. 12. Rule is made absolute in the aforesaid terms and the Writ Petition is also disposed of in terms thereof. However, there shall be no order as to costs. 13. This order will be digitally signed by the Private Secretary/ Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order. [FIRDOSH P. POONIWALLA, J.] [B. P. COLABAWALLA, J.] AUGUST 07, 2026 Mamta Kale