RBI / Banking — disclosure before fraud classification · F2J-C-2936
Jayesh V. Valia v. Canara Bank & Ors.
VALIDATED · ACTUAL COURT DOCUMENTSource transparency: The local PDF is an actual court document retained from the complete public source. The official court portal is recorded separately. Verify the official record and subsequent history before reliance.
Holding (ratio)
Supplying the investigation and forensic-audit reports relied on for fraud classification is the rule; confidentiality-based redaction is exceptional and cannot deny a meaningful defence.
Operative order (extract)
The fraud-classification order was quashed, with liberty to commence fresh proceedings after complete disclosure and a personal hearing.
Scope limits
The holding is confined to the issues actually decided in the retained judgment; no view is attributed to the court on questions expressly left open or remanded.
Sources and completeness
- PDF status
- Complete searchable public court copy, retained unchanged
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- PDF pages
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- Extracted words
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84298fc4ea6862f5607c860c1e1f940dbc67f96a3fdef3fc7f401f657e967983
Complete searchable judgment text
CNR No : HCBM020084982026
2026:BHC-OS:17254-DB
4-WP-1385-2026.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 1385 OF 2026
Jayesh V. Valia .. Petitioner
Versus
Canara Bank & Ors. .. Respondents
Mr. Birendra Saraf, Senior Advocate a/w Adv. Rupesh Geete,
Adv. Aman Saraf, Adv. Priya Dangat i/b Satyaki Law Associates
for the Petitioner.
Adv. Mahesh H. Chandanshiv for the Respondents.
CORAM: B. P. COLABAWALLA &
SOMASEKHAR SUNDARESAN, JJ.
DATE: JULY 31, 2026
P. C.
1. The above Writ Petition is filed seeking to quash and set aside
the Order dated 25th February, 2026 passed by the Respondent Bank
(through Respondent No.3) declaring the Petitioner’s account as fraud under
the Master Directions on Fraud Risk Management in Commercial Banks
(including Regional Rural Banks) and All India Financial Institutions dated
15th July, 2024 (for short ‘the Master Fraud Circular of 2024’). The short
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ground of challenge in the above Writ Petition is that the Show Cause Notice
issued to the Petitioner dated 22nd November, 2024 (and received by the
Petitioner on 2nd December, 2024) refers to an Investigation Report. A copy
of the said Investigation Report was sought by the Petitioner vide its letter
dated 19th December, 2024 alongwith all other relevant documents. The
Report was finally supplied to the Petitioner by the Respondent Bank vide its
letter dated 14th July, 2025. This Investigation Report is highly redacted as
can be seen from the copy annexed to the Writ Petition. The Investigation
Report can be found from pages 110 to 149 of the paper book. However, huge
parts of this Investigation Report are redacted. Further, one must note that
this Investigation Report is dated 5th August, 2015.
2. Be that as it may, the Petitioner once again addressed a letter to
the Respondent Bank dated 8th July, 2025 asking for a full copy of the
Investigation Report. In reply to the aforesaid letter, the Bank, vide its letter
dated 23rd September, 2025, stated that portions of the Report were redacted
as they contained internal observations and confidential information
pertaining to the Bank’s internal processes and decision making, and such
internal deliberations cannot be disclosed/shared with third parties.
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3. Thereafter, the Respondent Bank passed the Impugned Order
dated 25th February, 2026 classifying the account of the Petitioner as fraud.
What is interesting to note is that now for the first time, in the Impugned
Order, the Respondent Bank refers to a Forensic Audit Report dated 28 th
June, 2015. As noted earlier, the Investigation Report is dated 5 th August,
2015. Hence, atleast from a reading of the Impugned Order, there appears to
be not only an Investigation Report which is referred to at page 156 of the
paper book, but also a Forensic Audit Report referred to at page 155.
Admittedly, the Forensic Audit Report has not been furnished to the
Petitioner. On this ground alone, we are of the view that the Impugned Order
deserves to be quashed and set aside as the same is in the teeth of the
Judgements of the Hon’ble Supreme Court in the case of State Bank of
India and Ors. Vs. Rajesh Agrawal and Ors. (2023 6 SCC 1) and in
the case of State Bank of India Vs. Amit Iron Pvt. Ltd. and Ors.
(2026 SCC Online SC 538). Infact, we find that even the Investigation
Report supplied to the Petitioner is highly redacted and therefore incomplete.
We are of the view that the reasons given for redacting portions of the Report,
as mentioned in the letter dated 23rd September, 2025 and in the Affidavit in
Reply filed today, are wholly unsustainable and contrary to the observations
of the Hon’ble Supreme Court in Amit Iron Pvt. Ltd. (supra). Paragraphs
121 to 124 of this decision are relevant in this regard and read thus :
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“121. The Show Cause Notice and reply as well as the
procedure contemplated in Para 2.1, which is a reiteration of
what was held in Rajesh Agarwal (supra), are with regard to
proceedings that have civil consequences for the borrower. It
may be a trigger for initiation of criminal proceedings but as far
as the right to reputation as well as impacting Article 19(1)(g)
rights, the matter stood concluded with Rajesh Agarwal (supra).
In view of the same, following the holding in T. Takano (supra),
we hold that the borrower has a right to be disclosed of the
material relevant to the proceeding against him including
disclosure of the audit report.
122. The right to disclosure is not absolute if the disclosure of
any part affects third party interest. In the opinion of the bank,
the bank should communicate that the disclosure of such part
would affect third party rights. Thereafter the borrower will
have an opportunity to respond that the information is necessary
to represent effectively.
123. If, thereafter, some portion of the forensic audit report or
other material are found to impinge upon third-party rights in
the opinion of the bank, the bank can withhold disclosure of
those parts of the report.
124. We hold that the supply of the Forensic Audit Report is the
rule. The exceptions are what have been set out hereinabove.
Unlike in the case of T. Takano (supra) which dealt with the
securities market, instances will be rare where; in the forensic
audit reports of banks where the borrower is associated at the
stage of making the report, any claim for privilege of any part of
the report may arise. However, in the exceptional cases that they
do arise, the above procedure should be followed.”
(emphasis supplied)
4. As can be seen from this decision, the supply of the Forensic
Audit Report is the rule, and the exceptions are what have been set out in the
Judgement, and unlike in the case of T. Takano (supra) which dealt with
the securities market, instances would be rare where, in Forensic Audit
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Reports of Banks, any claim for privilege may arise. To put it in a nutshell, it
is only in very rare and limited cases, redactions may be justified, namely,
which affect or impinge third party rights. The reasons given for the
redaction in the present case are not of such a nature as set out in the letter
dated 23rd September, 2025. Hence, even on this ground, namely non-supply
of a complete copy of the Investigation Report, the Impugned Order cannot
be sustained and has to be set aside. For all the aforesaid reasons, the
Petition succeeds and the Impugned Order dated 25 th February, 2026 is
hereby quashed and set aside.
5. The Bank is at liberty to reinitiate proceedings against the
Petitioner if it so chooses, by issuing a fresh Show Cause Notice and
thereafter supplying all the relevant material, including a complete copy of
the documents sought to be relied upon in the said Show Cause Notice. From
the record we find that the Bank had given an opportunity of a personal
hearing to the Petitioner as recorded in the Impugned Order itself. Since this
opportunity was accorded by the Bank to the Petitioner, in the peculiar facts
of the present case, we direct that the Bank shall give a personal hearing to
the Petitioner before passing a fresh Order as contemplated in the Master
Fraud Circular of 2024.
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6. We may hasten to add that we have not examined the merits of
the matter as to whether the Petitioner be declared a fraud or otherwise, and
that is something entirely left for the Bank to ascertain after supplying the
necessary documents to the Petitioner and hearing the Petitioner in that
regard.
7. 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.
8. 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.
[SOMASEKHAR SUNDARESAN, J.] [B. P. COLABAWALLA, J.]
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