Bombay High Court Nullifies Bank of India’s Declaration of Realty Firm as ‘Fraud’ and ‘Wilful Defaulter’
In a recent ruling, the Bombay High Court declared the Bank of India’s decision to label Pune Buildtech Pvt Ltd as ‘fraud’ null and void. The court also deemed the inclusion of the realty firm’s name in any communication or blacklisting pertaining to the company’s access to institutional credit invalid.
The court further ordered the bank to remove Pune Buildtech’s name from the list of ‘wilful defaulters’. Additionally, the lender was directed to retract any information previously sent to Credit Information Companies that declared the company a wilful defaulter.
Settlement Amount Paid
The high court noted that the entire settlement amount mentioned in the Consent Terms, totaling Rs. 7 billion, had been paid by Pune Buildtech to the Bank of India in June 2024. Despite receiving the entire sum, the court questioned how the bank could proceed with declaring the company as a wilful defaulter after issuing a ‘No Dues Certificate’ to Pune Buildtech.
Lack of Intimation
Prior to the court’s ruling, the developers’ legal representation argued that no official communication had been given to Pune Buildtech regarding the account’s classification as a ‘fraud’ account. They stated that the information had only been verbally conveyed.
Delayed Notice
Regarding the declaration of the company as a ‘wilful defaulter’, Pune Buildtech highlighted that they received a show cause notice on May 4, 2020. However, the letter informing them that the bank’s Identification Committee had decided to label them as wilful defaulters did not reach the company until July 1, 2020.
Bank and Developer Comments
Email queries sent to both Bank of India and Pune Buildtech remained unanswered at the time of writing. Munaf Virjee, founder of AMR Law and the lawyer representing Pune Buildtech, declined to provide a comment on the matter.
Legal Stipulations on Settlement
The court emphasized that both parties had entered into consent terms on March 22, 2024, regarding a one-time settlement (OTS). The OTS also specified that upon receiving the settlement amount, the Bank of India would withdraw any ongoing proceedings and actions taken against any party involved in the matters covered in the Consent Terms.
Background of the Case
The dispute originated from a term loan issued by a consortium of lenders, including the Bank of India, in 2013. Later, in March 2024, the parties agreed to an OTS, in which the realty firm committed to a full and final settlement of Rs. 703 crore.
Challenging Bank’s Actions
Pune Buildtech, in two separate petitions, argued that despite fulfilling the terms of the consent settlement and issuing a no-due certificate, the bank persisted in branding their account as ‘fraud’ and ‘wilful defaulter’.
The recent ruling by the Bombay High Court provides clarity and relief to Pune Buildtech, nullifying the previous assertions made against them by the Bank of India. It remains a critical case illustrating the importance of proper communication and adherence to legal obligations to prevent unjust blacklisting.
