Shantanu Prakash Vs State Bank Of India & Ors. (Delhi High Court)
Delhi High Court recently addressed the issue of Show Cause Notices (SCNs) issued by banks for declaring an account as fraudulent under the Insolvency and Bankruptcy Code, 2016 (IBC). The petitioner, an ex-director and guarantor of M/s Educomp Solution Limited, challenged the SCNs issued by multiple respondent banks.
The petitioner argued that the SCNs were issued without supplying the requisite documents, preventing them from effectively responding. The petitioner, having no access to the company’s documents under the control of the Resolution Professional (RP), requested relevant documents from the respondent banks multiple times but received no response.
The court emphasized that fair procedure and the Principles of Natural Justice require providing relevant documents forming the basis of a SCN to enable the concerned party to respond effectively. Failure to provide these documents reduces the SCN process to a mere formality. Citing previous judgments, the court highlighted that denial of relevant documents violates natural justice principles.
In response to the petitioner’s submissions, the respondent banks claimed to have already provided the necessary documents or offered inspection of records. However, the court found that complete documents were not provided to the petitioner, despite partial responses from some banks.
