The Bombay High Court, through a significant verdict by Justice R.I. Chagla and Justice Farhan P. Dubash, recently overturned the Bank of India's decision to label Jet Airways founder Naresh Goyal's account as "fraud". The court observed in its ruling that the bank failed to provide Goyal an opportunity to be heard before arriving at its classification.

Highlighting a fundamental lapse, the judges stated, "The Petitioner has not been granted an opportunity of 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 court set aside the bank’s earlier determination, declaring, "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."

Brief Facts:

The controversy stemmed from a show cause notice issued on July 1, 2025, which itself referred back to an earlier directive classifying Goyal’s account as fraudulent. The initial notice, dated December 2024, did not furnish Goyal with the forensic audit report conducted by the bank.

Although the July 2025 notice attached the report, the bank still relied on the former classification without allowing Goyal an opportunity to represent his case. Challenging both the notices and the classification in the High Court, Goyal argued that the bank's conduct was arbitrary and violated fundamental principles of natural justice.

He contended that no formal order declaring his account as fraudulent had ever been served to him, rendering the classification without basis.

While the bank justified its actions, its counsel assured the court that it would not pursue further steps based on the earlier classification or the July 2025 notice.

The Court accepted this assurance and restrained the bank from acting on the fraud classification.

The judgment further clarified, "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, it left open the possibility for the bank to issue a fresh show cause notice, insisting that it must be done through a different committee and strictly in accordance with 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'."

Case Details :Naresh Goyal Vs Bank of India

Appearances :

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.

The Bank of India’s legal team included advocate Abhinav Chandrachud and advocates Rakesh Singh, Kedar Nayak, and SD Shetty, under the instruction of MV Kini & Co.

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