Delhi High Court quashes ‘Fraud’ classification against Religare Finvest

The Delhi High Court has delivered a major legal victory to Religare Finvest Limited (RFL), a material subsidiary of Religare Enterprises Limited (REL), by quashing the classification of its account as “fraud.” The order, dated July 22, 2025, and made available on the court’s website on August 1, 2025, directs a consortium of 14 banks to remove RFL’s name from the Central Fraud Registry within a period of two weeks.

The ruling is the culmination of a legal challenge brought by Religare Finvest through a writ petition. In its petition, RFL contested the fraud classification by the respondent banks on two key grounds. First, it argued that the lenders failed to provide an opportunity for a personal hearing before taking the decision, a violation of the principles of natural justice. Second, RFL contended that since “No Dues Certificates” had been issued by each lender after a One-Time Settlement (OTS), there was no purpose in continuing the fraud classification.

The list of respondent banks affected by this decision includes:

1. Central Bank of India
2. Bank of Baroda
3. Bank of India
4. Punjab and Sind Bank Limited
5. Punjab National Bank
6. Small Industries Development Bank of India
7. Syndicate Bank
8. UCO Bank
9. Federal Bank Limited
10. IDBI Bank Limited
11. Karnataka Bank Limited
12. Karur Vysya Bank
13. Axis Bank
14. South Indian Bank Limited

During the course of the legal proceedings, which began with the court issuing a notice to the banks on May 10, 2024, the Central Bank of India independently removed the fraud tag on August 23, 2024.

The Court, in its final judgment, observed that Religare Finvest was not given an opportunity to be heard before the fraud classification. This finding was consistent with the precedent set by the Supreme Court in State Bank of India vs. Rajesh Agarwal & Ors. (2023), which mandated a hearing before such a classification. The Supreme Court had highlighted that a fraud tag could have dire consequences for a borrower, including a “credit freeze” and potential “civil death,” making a hearing essential. The Delhi High Court also cited its own Division Bench decision in IDBI Bank Ltd. v. Gaurav Goel & Ors. to clarify that “hearing” in this context includes a personal hearing.

As a result, the court’s order not only quashes the fraud classification but also directs the banks to take steps to remove RFL’s name from the Central Fraud Registry. The court has, however, granted the banks the liberty to initiate other legal action against RFL if they deem it necessary. Religare Enterprises Limited formally informed the National Stock Exchange (NSE) and BSE Limited of this development on August 2, 2025.

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