In Brief
The Supreme Court held that borrowers whose bank accounts are classified as fraudulent under Reserve Bank of India Directions must be given a hearing before such classification. Although the fraud detection process serves important public purposes, the serious civil consequences—including a five-year ban on institutional financing—amount to blacklisting and adversely affect fundamental rights. The Court ruled that the principles of natural justice, specifically the rule "hear the other side," must be read into the RBI Directions despite their silence. Borrowers are entitled to notice, a copy of the forensic audit report, and opportunity to submit representations before classification. The Court upheld the High Court of Telangana's decision and set aside findings that dismissed borrowers' writ petitions.
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