Decisions Of Commercial Banks Cannot Be Challenged Through PILs Without Cogent Material: Delhi High Court
Stating that nationalised banks cannot be dragged into litigation on speculative allegations of financial impropriety, the High Court observed that courts must refrain from entertaining petitions that seek to question bona fide commercial decisions of financial institutions without supporting evidence.
Justice C. Hari Shankar, Justice Ajay Digpaul, Delhi High Court
The Delhi High Court has held that petitions alleging financial misconduct by banks cannot be entertained in the absence of concrete material, as such an act could have an adverse economic impact on the entire financial corporate infrastructure of the country.
The Court was hearing a public interest petition that sought a judicial probe into alleged lapses by nationalised banks and public financial institutions in the restructuring and management of loans issued to various commercial entities. The petitioner claimed large-scale financial misfeasance and requested sweeping directions, including a court-monitored investigation.
A Division Bench of Justice C. Hari Shankar and Justice Sanjeev Narula, while refusing to entertain the plea, noted that “…the banking sector constitutes the backbone of our economy – as it does the economy of every nation. Easy allegations of financial impropriety by banks should not be entertained by courts. Banks, acting bona fide, cannot be made answerable to the judiciary regarding the economic expediency of their decisions, except where the attention is drawn, by the court, to cogent material which seems to point in that direction.”
Senior Advocate Prashant Bhushan represented the petitioner, while R. Venkataramani, Attorney General of India, represented the respondents.
Background
The petition was filed as a public interest litigation seeking intervention of the High Court in decisions made by nationalised banks relating to financing, loan restructuring and assistance to distressed commercial entities. The petitioner alleged that several banks had written off or restructured large amounts, which, according to him, amounted to financial irregularities.
It was contended that such write-offs were detrimental to public interest and reflected collusion between commercial borrowers and government-run financial institutions. The petition sought judicial oversight into lending decisions and sanctioning of credit facilities.
The respondents opposed the plea, arguing that the petition was based on conjecture and lacked any verifiable material. They submitted that banking transactions are governed by specialised statutes, regulatory authorities and the Central Government, which already provide multiple layers of scrutiny.
Court’s Observation
The Delhi High Court observed that PIL jurisdiction cannot be used as a tool for indiscriminate interference in financial markets. It was held that banking decisions involve commercial and economic considerations that are beyond the domain of a writ court, absent any evidence of mala fides or statutory violations.
Cautioning Courts from entertaining such pleas, the Bench observed that “unwarranted entertainment of such petitions is likely to seriously prejudice the entire system of advancing of loans to distressed entities by financial institutions, which would have an adverse economic impact on the entire financial corporate infrastructure of the country.”
Highlighting the economic repercussions of judicial intrusion into routine banking operations, the Court stated that the banking sector “constitutes the backbone of our economy – as it does the economy of every nation.” It further emphasised that “easy allegations of financial impropriety by banks should not be entertained by courts.”
The Court held that banks acting in good faith cannot be required to justify every financial decision before the judiciary unless the petitioner produces credible material pointing to fraud, corruption, or breach of statutory duties, noting that judicial review in economic matters is permissible only when supported by evidence, not suspicion or public perception.
The Bench also stressed that before ordering any form of inquiry, a court must first apprise itself of the facts by calling upon banks or related entities to respond to credible allegations. Absent such material, issuing investigative directions would amount to meddling in purely commercial lending decisions.
In the present case, the Court found that the allegations were entirely speculative and lacked support from any documentary material. No instance of statutory violation, mala fide lending, or collusion by bank officials had been demonstrated.
The Bench noted that the petition did not even identify a specific transaction that could prima facie warrant judicial scrutiny. It was observed that the petitioner was seeking to convert the Court into a supervisory body over banking operations, which is impermissible under constitutional jurisdiction.
As the claims were based on conjecture and lacked an evidentiary foundation, the Court held that no inquiry was warranted and declined to issue any directions to the Union or the Reserve Bank of India.
Conclusion
Finding the petition devoid of legal foundation or substantive evidence, the High Court held that no grounds were made out to initiate any inquiry into commercial decisions taken by nationalised banks. The plea was accordingly dismissed.
Cause Title: Infrastructure Watchdog v. Union of India (Neutral Citation: 2025:DHC:9577-DB)
Appearances
Petitioner: Senior Advocate Prashant Bhushan, with Advocates Pranav Sachdeva, P. Rohit Ram, Abhay Nair and Sanyam Jain.
Respondents: R. Venkataramani, Attorney General of India, Senior Advocate Mukul Rohatgi with Advocates Alok Kumar, Parnika Jolly, Tarun Kumar, and E.J. Jerome.
