In M/S Paras Lubricants Ltd. vs. Punjab National Bank & Ors., the Delhi High Court examined a serious disagreement involving Punjab National Bank's designation of a company's account as "fraud" on October 15, 2024. The petitioner, Paras Lubricants Ltd., addressed the court after obtaining notice from the State Bank of India (SBI) that PNB had classed their account as fraudulent, resulting in the suspension of credit facilities.
The petitioner company contended that the classification was arbitrary and unjust, as PNB had failed to provide prior notice or an opportunity for a hearing. They argued that their account had been closed in 2011 following a One Time Settlement (OTS) with the erstwhile Oriental Bank of Commerce (OBC), which later merged with PNB.In spite of this settlement, PNB singularly classified the account as extortion in 2023, citing earlier debate with respect to property contracts utilized as collateral for the credit.
The Delhi Tall Court, managed over by Justice Dharmesh Sharma, held that PNB's activity was in infringement of common equity, as no opportunity had been given to the solicitor to reply to the charges some time recently classifying the account. The court emphasized the standards laid down by the Incomparable Court in SBI vs. Rajesh Agarwal, which commands that borrowers must be informed and given a chance to clarify the discoveries some time recently being pronounced false.
The court quashed PNB’s decision and ordered the immediate resumption of credit facilities. The court ordered PNB to pay ₹5,00,000 to Paras Lubricants Ltd. for financial and reputational damages. This case emphasizes the significance of following due process and natural justice principles when conducting banking operations.
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TAGS: Delhi High Court Paras Lubricants Punjab National Bank fraud classification natural justice credit facilities One Time Settlement State Bank of India banking dispute October 2024 judgment.
