REMARKABLE AND HISTORIC JUDGEMENT GIVEN ON 10.01.2024 BY THE HON. HIGH COURT AT CALCUTTA in WPA No. 21220 of 2023 for M/s Nag Chowdhury Associates and another Vs. Indian Bank Association and others. Mr. Debasish Ghosh, Ms. Antara Biswas… for the petitioners. Ms. Sonal Shah, Mr. Kushagra Shah…for the South Indian Bank Limited.

HISTORY AND BACKGROUND

1. The petitioner has been a valuer with the South Indian Bank Limited, the manager of which has been made respondent no.4 in the present writ petition.

2. It is contended that the Bank issued two show-cause notices to the petitioner for alleged insufficiency/irregularity in the work done as valuer by the petitioner for the Bank, to both of which replies were given by the petitioner. Subsequently, the hearing was given by way of video conferencing.

3. Thereafter, the petitioner suddenly came to know from a third party, that is, the Axis Bank that the said Bank seeks to remove the petitioner from its panel on the ground that the petitioner’s name is featured in the caution list of the Indian Bank Association/respondent no.1 (in short “IBA”). When the petitioner sought to enquire about the genesis of such action by the IBA, the Axis Bank informed that on the allegation of wrong and incorrect valuation made against the petitioner by the South Indian Bank, such action had been taken by the IBA. A copy of such intimation by the Axis Bank is handed over in court today and kept on record.

4. The grievance of the petitioner is many-fold.

First, it is contended that no outcome/order/decision of the hearing given to the petitioner was ever intimated to the petitioner.

5. Secondly, there was a prior expression of opinion by the South Indian Bank about the petitioner’s guilt in the bank’s communications giving the opportunity of hearing to the petitioner.

6. Thirdly, the IBA did not give an independent hearing or opportunity of defense to the petitioner before putting the petitioner’s name on the caution list.

7. Lastly, it is argued that there is no proper committee as contemplated in Clause 3.4 of part C of the ‘Handbook on Policy, Standards, and Procedures for Real Estate Valuation by Banks and HFIs in India’.

8. Learned counsel for the Bank controverts all the said allegations and submits that sufficient hearing was given to the petitioner. The deliberations of the committee, which is already in place, it is submitted, took place only on August 14, 2023, and the writ petition was affirmed on August 29, 2023 and filed soon thereafter. As such, there was a paucity of time for making the communication of its decision to the petitioner.

9. Secondly, it is argued that there was no prior formation of opinion as to the petitioner’s guilt at any point of time.

10. Moreover, it is argued that the Bank has a committee in place in terms of the handbook referred to by the petitioner.

11. It is also submitted that no further hearing is required to be given under the handbook by the IBA to the petitioner.

12. Thus, several arguable issues have been raised by the parties.

13. The Bank also has to explain as to whether it has a proper committee as contemplated in the above referred Handbook in place which took the decision impugned here.

14. Moreover, the Bank is also required, inter-alia, to explain when it communicated to the IBA to put the petitioner’s name in the caution list as well as explain why the order was not communicated to the petitioner.

FINALLY WHAT THE ORDER SAYS:

In the absence of any specific particulars of fraud either in the show cause notices or the impugned decision, the Bank acted without jurisdiction in holding that petitioner no. 1 was guilty of fraudulent action and referring to the name of petitioner no. 1 for being put up in the caution list of the IBA. The minutes of the committee decision, whereby petitioner no. 1 was indicted, also do not show that any specific allegation of fraud was mentioned or substantiated in the said resolution.

Thus, the impugned action of holding petitioner no. 1 guilty of fraud as well as terminating petitioner no. 1 and putting up the name of petitioner no. 1 on the caution list of the IBA was dehors jurisdiction and against the law and relevant guidelines. Accordingly, W.P.A. No.21220 of 2023 is allowed on the contest, thereby setting aside the impugned termination of petitioner No. 1 and directing the IBA to strike the name of petitioner no. 1 off its Caution List immediately.

However, nothing in this order shall debar the respondent bank from initiating fresh proceedings against the petitioner. In the event a proceeding regarding the professional valuation of the petitioner no. 1 is taken by the Bank, an appropriate committee shall be formed with a  representation of valuers/valuers’ association in terms of Clause 3.4 of the IBA Handbook in the committee, which will decide against the petitioner upon issuing show cause and hearing the petitioner. 

In the event the respondent Bank, that is, the South Indian Bank, seeks to initiate an action in terms of the RBI Circular dated March 16, 2009, against petitioner no. 1 on the allegation of fraud, the particulars of such fraud shall be disclosed in the show cause notice to allow petitioner no. 1 to address those allegations comprehensively.

Only after such show cause has been issued and a hearing is given to petitioner no. 1, The bank will be at liberty to take appropriate action against petitioner no. 1 by law, both about termination of the petitioner from the Bank’s panel and holding the petitioner to be guilty of fraud and consequentially, if so held, to refer the name of the petitioner no. 1 for being put up in the Caution List of the IBA