The Bombay High Court has set aside Bank of India’s classification of Jet Airways founder Naresh Goyal’s account as “fraud,” citing a violation of natural justice. The Court emphasized that Goyal was not given an opportunity to make a representation before the decision.
Mumbai: The Bombay High Court has recently set aside the Bank of India’s decision to classify the account of Jet Airways founder Naresh Goyal as “fraud”. The judgment, delivered on September 25, was given by a Bench comprising Justices RI Chagla and Farhan P Dubash.
The Court observed,
“The Petitioner has not been granted an opportunity of a representation before the classification of the Petitioner’s account as ‘fraud’. The mere re-examination of the earlier classification of the Petitioner’s account as fraud does not meet with the rule of audi alteram partem.”
Consequently, the Bench quashed the bank’s decision and set it aside.
The Court said,
“The order classifying the Petitioner’s account as ‘fraud’ as in paragraph 2 of the impugned Show Cause Notice dated 1st July, 2025 is accordingly quashed and set aside.”
The dispute originated from a show cause notice issued by the bank on July 1, 2025, which referred to an earlier order classifying Goyal’s account as fraudulent. The initial notice, sent in December 2024, did not provide Goyal with the report of the forensic audit conducted by the bank.
While the July 2025 notice included this audit report, it still relied on the prior classification and failed to give Goyal a chance to make a representation.
Goyal approached the High Court, challenging both the notices and the account’s classification. He contended that the bank’s actions were arbitrary and violated the principles of natural justice.
He further argued that no formal order declaring his account as fraudulent had ever been served on him, rendering the classification baseless.
Although the bank defended its actions, its counsel assured the Court that no further action would be taken based on the previous classification or the July 2025 notice. The Court recorded this assurance and restrained the bank from acting on the fraud classification.
The Court said,
“Accordingly, the Respondent No.1 – Bank shall not take any action pursuant to the earlier classification of the Petitioner’s account as ‘fraud’ and / or the impugned Show Cause Notice dated 1st July, 2025, which has been set aside by this order.”
However, the Bench clarified that the bank retains the right to issue a fresh show cause notice. This can only be done through a different committee, and the bank must strictly adhere to the principles of natural justice.
The Court ordered,
“The Respondent No.1 – Bank shall comply with the principles of natural justice and the rule of Audi Alteram Partem in carrying out the exercise pursuant to the issuance of fresh Show Cause Notice in the event they so desire to carry out such an exercise for the purpose of determining whether the Petitioner’s account to be classified as ‘fraud’.”
Naresh Goyal was represented by Senior Advocate Sharan Jagtiani along with advocates Ameet Naik, Abhishek Kale, Tushar Hathiramani, Shraddha Achliya, Pranjal Agarwal, Harish Khedkar, Devashish Jagirdar, and Ronit Doshi, instructed by Naik Naik & Co.
Bank of India was represented by Advocate Abhinav Chandrachud along with Rakesh Singh, Kedar Nayak, and SD Shetty, instructed by MV Kini & Co. Another respondent in the case was represented by Advocate Huzan Bhumgara with Pradeep Mane and Shubhi Dotiya, instructed by Desai and Diwanji.
This verdict highlights the importance of giving individuals a fair opportunity to present their case before financial institutions classify accounts as fraudulent.
The Court’s decision reaffirms the principle of audi alteram partem, which ensures that no person is condemned without being heard.
Case Title:
Naresh Goyal Vs Bank of India
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