Abstract

Publication Note: Originally published on Manupatra.

This article examines the application and limits of the doctrine of audi alteram partem in the regulation of banking fraud in India. It analyses the evolving legal framework governing fraud classification by banks, with particular focus on the Supreme Court's decisions in State Bank of India v. Rajesh Agarwal (2023), Central Bureau of Investigation v. Surendra Patwa (2025), and State Bank of India v. Amit Iron Pvt. Ltd. (2026). The article traces the procedural safeguards introduced following Rajesh Agarwal and the subsequent codification of natural justice requirements under the RBI's Master Directions on Fraud Risk Management, 2024. It further examines the question of whether natural justice requires a personal hearing before fraud classification, the Supreme Court's distinction between administrative fraud classification and criminal investigation, and the competing considerations of procedural fairness, regulatory efficiency, protection of public funds, and prevention of asset diversion. The article argues that the contemporary framework preserves the right to procedural fairness primarily through written notice, representation and reasoned decision-making, while recognising that the requirements of natural justice remain context-dependent.