Look Out circular – banking – It appears that merely for the asking by the bank the LOC was issued – There has been non-application of mind by respondent No.3 while issuing LOC dt., and mechanically it appears to have been issued without there being any material to show that the petitioner would fall in the category of a person against whom an LOC is permitted to be issued by the guidelines framed in that regard – Bank had abused its authority to request the opening of the LOC – Bank seems to be of the opinion that if a borrower commits a default in payment of loan, and the loan account becomes an npa, such an event has occurred only because of a fraud committed by the borrower – This Court can take judicial notice of the fact that businesses can fail for several reasons such as market conditions, labour unrest, lack of raw material, events like pandemic of Covid-19 etc. – Merely looking at the quantum of loss caused to a banker, it cannot be presumed that there was a fraud committed by the borrower/guarantor, moreso when no criminal case alleging fraud has even been filed against the borrower/guarantor – Suspicion cannot take the place of proof – It may be that bank entertained the strong apprehension and believed that the guarantors/directors might leave the country without paying the dues of the bank and without informing them and so sought LOC, but that by itself is not sufficient to seek issuance of an LOC since mere suspicion is not enough and it cannot take the place of proof.
PLRonline 414654 (LogIn to read)
