The Hon'ble Bombay High Court vide its order dated 3rd July, 2026 was pleased to set aside the fraud classification order passed by Bank of India by which the account of Future Lifestyle Fashions Limited, and correspondingly the Petitioners, were classified as “fraud”, after holding that the order failed to satisfy the mandatory requirement of being a reasoned order under Clause 2.1.1.4 of the 2024 Fraud Master Directions.
The Court observed that the Bank had merely reproduced the findings of the forensic audit report without independently considering the petitioners' detailed response to the show cause notice or recording reasons for classifying the account as fraud. Accordingly, the impugned order was set aside.
This judgement is significant because it reiterates that fraud classification by banks is not a mere administrative formality and cannot be sustained on conclusory or mechanical orders. Given the serious civil and reputational consequences of such classification, the decision underscores that banks must independently apply their mind, deal with the noticee’s response, and record clear reasons in support of their decision.
The Dentons Link Legal team was led by Petrushka Deas Dasgupta (Partner) and comprised Krishna Baruah (Principal Associate), Ankita Yadav (Senior Associate), Altamash Qureshi (Senior Associate), Kewal Buddhdev (Associate), Devdatta Uchil (Associate), and Janhavi Pise (Associate).