Hon'ble Judges/Coram:
Dr. D.Y. Chandrachud, C.J.I. and Hima Kohli

JUDGMENT

Dr. D.Y. Chandrachud, C.J.I.

A.	Background
B.	Facts
C.	Submissions
D.	Analysis
D.1	Regulatory Framework
D.2	Audi Alteram Partem
D.3	No implied exclusion of audi alteram partem.
D.4	Challenge to constitutional validity.
E.	Conclusion

A. Background

1. The civil appeals arise out of a challenge to the Reserve Bank of India (Frauds Classification and Reporting by Commercial Banks and Select FIs) Directions 2016.¹ Issued by the Reserve Bank of India², these directions were challenged before different High Courts primarily on the ground that no opportunity of being heard is envisaged to borrowers before classifying their accounts as fraudulent. The High Court of Telangana has held in the impugned judgment³ that the principles of natural justice must be read into the provisions of the Master Directions on Frauds. The decision has been assailed by the RBI and lender banks through these civil appeals.

2. In this background the court has to consider whether the principles of natural justice should be read into the provisions of the Master Directions on Frauds. For the reasons to follow, we hold that the principles of natural justice, particularly the Rule of audi alteram partem, has to be necessarily read into the Master Directions on Frauds to save it from the vice of arbitrariness. Since the classification of an account as fraud entails serious civil consequences for the borrower, the directions must be construed reasonably by reading into them the requirement of observing the principles of natural ju........