Accused Can't Claim Right Of Hearing Before Registration Of FIR : Supreme Court

The Supreme Court has held that an accused cannot claim to have a right of hearing before the registration of an FIR and that the principles of natural justice are not applicable at the stage of reporting a criminal offence.

A bench comprising Chief Justice of India DY Chandrachud and Justice Hima Kohli made this observation while deciding the issue whether borrowers have the right to be heard before their accounts are classified as fraudulent in terms of the RBI's Master Directions on Frauds.

They argued that the classification of accounts as fraud will lead to registration of FIR, resulting in criminal consequences and hence, they borrowers have a right to be heard. 

Addressing this argument, the bench observed :

"At the outset, we clarify that principles of natural justice are not applicable at the stage of reporting a criminal offence, which is a consistent position of law adopted by this Court. In Union of India v. W N Chadha, a two-judge bench of this Court held that that providing an opportunity of hearing to the accused in every criminal case before taking any action against them would “frustrate the proceedings, obstruct the taking of prompt action as law demands, defeat the ends of justice and make the provisions of law relating to the investigation lifeless, absurd, and self-defeating.” Again, a two-judge bench of this Court in Anju Chaudhary v. State of UP has reiterated that the Code of Criminal Procedure, 1973 does not provide for right of hearing before the registration of an FIR"

However, the bench held that borrowers have a right to be heard before their accounts are classified as fraud. The principles of natural justice were read into the RBI's Master Circular.

"We hold that the rule of audi alteram partem ought to be read in Clauses 8.9.4 and 8.9.5 of the Master Directions on Fraud. Consistent with the principles of natural justice, the lender banks should provide an opportunity to a borrower by furnishing a copy of the audit reports and allow the borrower a reasonable opportunity to submit a representation before classifying the account as fraud. A reasoned order has to be issued on the objections addressed by the borrower", the Court held.

Case Title : State Bank of India vs Rajesh Agarwal and connected cases

Citation : 2023 LiveLaw (SC) 243

Code of Criminal Procedure 1973- Section 154- principles of natural justice are not applicable at the stage of reporting a criminal offence-Code of Criminal Procedure, 1973 does not provide for right of hearing before the registration of an FIR - Para 30

Banking Law - Borrowers have right to be heard before their accounts are classified as fraud- the decision to classify the account as fraudulent must be made by a reasoned order.- Since the RBI's Master Directions do not expressly provide for an opportunity of hearing to the borrower, audi alteram partem must be read into the provisions to save them from the vice of arbitrariness.

Principle of natural justice - Audi alteram partem-The application of audi alteram partem cannot be impliedly excluded from the Master Directions on Frauds-The principles of natural justice demand that the borrowers must be served a notice, given an opportunity to explain the conclusions of the forensic audit report, and be allowed to represent by the banks/ JLF before their account is classified as fraud under the Master Directions on Frauds. 

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