Monoranjan Roy v. SBI Stressed Assets Resolution Group & Ors.

What happened

The petitioner was a director of Pincon Spirit Limited, a borrower from a consortium of banks led by SBI. The Directorate of Economic Offences, West Bengal arrested the petitioner and other directors in November 2017 and April 2018, seized records and stocks, and sealed the company's premises. CIRP was started against the company, a liquidation order followed, and the NCLT ordered the DEO to de-attach the properties by orders of 19 February 2020. SBI appointed R. Dokania & Co. to do a forensic audit for 1 April 2013 to 31 March 2018, whose report of 4 June 2025 recorded that the borrower had provided no documents and that it had reviewed limited documents from the lenders, and gave findings on payments to entities said to be defunct, payments to a former director and trade receivables, subject to further findings on production of complete records. The bank issued a show cause notice on 18 November 2025 and, after the petitioner replied on 29 November 2025, withdrew it and issued an identical one on 2 December 2025, asking for a reply within 21 days. The petitioner argued that the report was inconclusive, that the books were with the DEO, and relied on T. Takano v. SEBI on disclosure of material. The bank said the report was enclosed and the Master Directions on Fraud Risk Management give 21 days to reply, and relied on Union of India v. Kunisetty Satyanarayana that a show cause notice is quashed only rarely.

Questions before the court

• Should the High Court quash a show cause notice proposing fraud classification when it rests on a forensic audit prepared without the borrower's records?

Why the court ruled this way

The audit report itself said its conclusions were based on the limited evidence available on its date, subject to further findings on production of full records, and noted that the borrower did not give documents and that its mail requests were blocked (paragraphs 18 to 21 and 25). Once liquidation starts, the board's powers are suspended, the liquidator is the custodian of books, and the auditor should send a formal requisition to the liquidator, and all formal document exchange must be routed through the liquidator (paragraph 24). The Court noted the principle in T. Takano that material influencing an authority's decision should be disclosed, while accepting from Kunisetty Satyanarayana that quashing a show cause notice is exceptional; but here the notice rested on a report that was not conclusive because the borrower's documents were not available to the auditor (paragraphs 26 to 28).

Controlling point

The impugned show cause notice could not stand because the audit report on which it rested was not conclusive.

Order and next steps

The writ petition was allowed and the show cause notice dated 2 December 2025 quashed and set aside, without preventing the bank from taking appropriate steps in accordance with law. If the bank wishes to rely on the forensic audit in future, it may ask the auditor to obtain documents from the liquidator or the DEO to reach a definite finding; the petitioner must forward any document the auditor requests, if in his possession, after verification by the liquidator in writing.

Practical implications

A borrower or former director facing a fraud-classification notice can ask whether the underlying forensic report was made with access to the books, and a lender can complete the audit via the liquidator before issuing a fresh notice.

Limits of this ruling

• The Court did not decide whether the account is fraudulent or the merits of the findings; it quashed the notice because the report was inconclusive, and the bank remains free to act afresh.