In the Matter of SS Hemani v. The Reserve Bank of India, a group of petitions contesting the steps taken by banks in accordance with Reserve Bank of India guidelines from 2016 regarding the classification and reporting of frauds by commercial banks and select financial institutions.
Analysis of Court Decision
The divisional judge bench of Bombay High Court Justice G.S. Patel and Justice Neela Gokhale imposed a stay to restrict actions by banks and their in-house committees in furtherance of the Master Circular.
The Court took notice of the complaints made in each petition in the current case regarding the alleged violations of natural justice principles while executing RBI instructions, including not being given the chance to be heard, not getting copies of the evidence that was cited, etc. The Court determined that it was essential to declare a rule and order a stay against any more bank acts that would further the Master Circular for the contested RBI directives until 11-09-2023. The ban would limit what banks and their internal committees may do in response to the concerned RBI directives. The Court further stated that although the instant petitions would typically have been determined right away, the matter needs to go through a number of procedural processes in order for the pleadings to be completed. The Court set the dates of 7-09-2023 and 8-09-2023 for the ultimate disposition of the complete group of hearings.
Additionally, the Court made it clear that the current ruling would not affect any cases in which the Central Bureau of Investigation was involved or where criminal procedures were ongoing. The document went on to say that “investigating authorities are free to file and proceed with FIRs without regard to any conclusions by the bank under the applicable Master Circular. Additionally, this order has no bearing on and does not exclude the pursuit of any legal remedies open to private individuals. The Courts also allowed the Banks the freedom to revoke, retract, or annul any orders already made in accordance with RBI directives that would be in conflict with the ruling in SBI v. Rajesh Agarwal by the Supreme Court. The process may potentially be restarted by the Banks in accordance with the aforementioned judgement. Since the Supreme Court did not overturn the Master Circular of RBI guidelines, the High Court did not halt their implementation.