Bombay High Court sets aside Bank of India classification of Naresh Goyal's account as fraud

The Bombay High Court recently quashed the Bank of India’s decision to classify Jet Airways founder Naresh Goyal’s account as “fraud” [Naresh Goyal Vs Bank of India].

In the decision dated September 25, a Bench of Justices RI Chagla and Farhan P Dubash found that the bank had not heard Goyal before taking the decision.

"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," it said.

Hence, it set aside the bank's decision.

"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 arose from a show cause notice dated July 1, which referred to an earlier order classifying Goyal’s account as fraudulent.

The initial notice issued in December 2024 had not provided Goyal with the report of the forensic audit conducted by the bank. The July 2025 notice annexed this report but still relied on the previous classification without giving Goyal an opportunity to make a representation.

Goyal challenged the notices and the classification before the High Court, contending that the bank’s actions were arbitrary and violated the principles of natural justice.

He argued that no order declaring his account as fraudulent had ever been served on him, making the classification baseless.

Though the bank defended its actions, its counsel told the Court that no further steps would be taken in pursuance of the earlier classification or the July 2025 notice.

The Court recorded this assurance and restrained the bank from acting upon the fraud classification.

"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," it said.

However, the Court clarified that the bank would be at a liberty to issue a fresh show cause notice, but only through a different committee and strictly in compliance with natural justice requirements.

"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”," ordered the Court

Goyal was represented by Senior Advocate Sharan Jagtiani 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 and advocates Rakesh Singh, Kedar Nayak and SD Shetty, instructed by MV Kini & Co.

Another respondent was represented by advocate Huzan Bhumgara with advocates Pradeep Mane and Shubhi Dotiya, instructed by Desai and Diwanji

[Read Judgment]