HC strikes down SBI’s “Fraud” classification on Unity Infraprojects’ account

Bombay High Court overturns SBI's fraud order on Unity Infraprojects Ltd, but CBI case accusing Avarsekars of defrauding banks proceeds.

Mumbai: The Bombay High Court provided relief to Kishore Avarsekar and Unity Infraprojects Ltd by overturning the State Bank of India’s (SBI) November 2019 order declaring the family firm’s loan account as a “fraud.”

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However, the division bench of Justice BP Colabawalla and Justice MM Sathaye rejected the Avarsekars’ plea to quash a complaint filed by SBI on August 17, leading to a Central Bureau of Investigation (CBI) case accusing them of defrauding a consortium of 16 banks to the tune of ₹3,847.58 crores between 2011 and 2017.

The SBI’s allegations include fraudulent LC (letter of credit) trade module, improper adjustment entries by fudging data, diverted funds through non-consortium accounts and transfers to related parties, unexplained excess payouts etc.

Kishore Avarsekar, chairman and managing director of Unity Infraprojects Ltd, along with his wife and two sons – all of whom are on the board of directors of the firm challenged the “fraud” order, arguing a breach of natural justice principles as they were not given notice or a hearing.

Avarsekars supported their argument, citing a similar case of March 27, 2023, where in the case of Anita Goyal, the Supreme Court’s judgement emphasised the need for natural justice principles in classifying accounts as fraudulent.

“In light of the aforesaid decision of the Supreme Court, we find that classifying the account of UIL as a fraud account and holding Petitioner Nos. 1, 2, 3, and 4 (Avarsekars) responsible for the alleged fraud cannot be sustained and is hereby set aside,” the bench said.

While setting aside the “fraud” classification, the court refused to intervene in the CBI complaint, asserting that investigating agencies can proceed independently of fraud orders, as clarified by the Supreme Court in March 2023.