Bombay High Court Overturns Fraud Declaration against Pune Buildtech by Bank of India

The Bombay High Court has overturned Bank of India’s decision to label Pune Buildtech Pvt Ltd as ‘fraud’ and declared it null and void, along with the inclusion of the realty firm’s name in any list or communication that blacklisted the company from obtaining institutional credit.

In a separate ruling, the court also ordered the bank to remove Pune Buildtech from its list of ‘wilful defaulters’ and to retract any information provided to Credit Information Companies that identified the company as a wilful defaulter.

The division bench, comprising Justice B.P. Colabawalla and Justice Somasekhar Sundaresan, noted in its October 8 order, “It is undisputed that the entire settlement amount, as specified in the Consent Terms (Rs 703.35 crore), was paid by the petitioners to Bank of India in June 2024.”

The court expressed confusion as to why the bank would continue to proceed with actions to declare Pune Buildtech a wilful defaulter, particularly after issuing the company a ‘No Dues Certificate.’

Senior Advocate Cyrus Ardeshir, along with Munaf Virjee of AMR Law, representing Pune Buildtech, argued that the company was never formally informed of its account being classified as a ‘fraud’ account. They were only notified verbally, without any prior intimation.

Regarding the ‘wilful defaulter’ declaration, Pune Buildtech contended that a show cause notice dated May 4, 2020, was sent by the Bank of India, indicating that its Identification Committee had classified the firm as a ‘wilful defaulter.’

The notice demanded that the company settle its outstanding dues within 15 days of receiving the letter, failing which it would be formally declared a wilful defaulter. However, this notice did not reach the company until July 1, 2020.

At the time of this report, neither Bank of India nor Pune Buildtech responded to email queries. Munaf Virjee, founder of AMR Law and representative of Pune Buildtech, also declined to comment.

The court, in its directive to the public sector bank, pointed out that both parties had entered into consent terms on March 22, 2024, regarding a one-time settlement (OTS).

According to these terms, upon receipt of the settlement amount, the Bank of India was required to withdraw all legal proceedings and actions taken under any law related to the matters outlined in the Consent Terms.

The dispute originated from a term loan that had been sanctioned by a consortium of lenders, including Bank of India, in 2013. The parties later agreed to the OTS in March 2024, under which Pune Buildtech committed to paying Rs 703 crore as a full and final settlement.

In two separate petitions, Pune Buildtech argued that despite fulfilling the terms of the consent agreement and receiving a ‘no dues’ certificate, the bank persisted in classifying the company as a ‘fraud’ and ‘wilful defaulter.’