Mumbai: The National Company Law Tribunal (NCLT) has rejected the application filed by Sri Adhikari Brothers Television Network Limited (SABTNL) seeking an interim stay on a Show Cause Notice (SCN) issued to the company by the Central Bank of India.
The Tribunal while rejecting the application held that the Bank had followed the High Court’s orders which maintained that the account of the applicant (SABTNL) if declared “fraud” then the consequent actions is that a show cause notice is issued to the applicant calling upon to show cause as to why their account should not be classified as ‘wilful defaulter’. The NCLT observed that the process followed by the bank complied with the RBI’s guidelines.
SABTNL had challenged the SCN under Section 60(5) of the Insolvency and Bankruptcy Code (IBC), arguing that its resolution plan had already been approved by the tribunal. The applicant contended that actions related to events prior to the resolution plan’s approval should not impact the company post-approval.
Earlier, the company had approached the Bombay High Court, claiming it was unaware of its account being classified as “fraud” until receiving the notice from Canara Bank.
The Bombay High Court temporarily stayed the earlier fraud declaration and directed Canara Bank to issue a fresh notice in compliance with the RBI’s Master Circular on Fraud Classification (dated July 15, 2024) and the Supreme Court’s judgment in State Bank of India & Others vs. Rajesh Agarwal & Others. Following these directives, Canara Bank withdrew its previous declaration and issued a new SCN.
The applicant challenged the new SCN, alleging procedural irregularities and prejudice. However, the NCLT held that the SCN adhered to the RBI’s guidelines and the Supreme Court’s directives.
“The applicant failed to demonstrate any procedural deviations by Canara Bank in issuing the SCN. Declaring an account as ‘fraud’ involves a detailed process, including providing the account holder an opportunity to respond. The SCN was deemed a necessary procedural step,” the tribunal stated.
The NCLT further declined the applicant’s request for an ex-parte interim stay, reasoning that the issuance of an SCN, by itself, does not cause harm if due process is followed.
