Isabella Mariam

The High Court of Delhi, Division Bench of Justice C. Hari Shankar and Justice Ajay Digpaul dismissed a public interest petition challenging the one-time settlement agreements entered into by two public sector banks with a hotel company in New Delhi. The Court ruled that banks acting in good faith cannot be made answerable to the judiciary for the economic wisdom of their decisions unless supported by concrete evidence of wrongdoing. It observed that since the banking sector forms the backbone of India’s economy, unfounded allegations of financial impropriety against banks should not be lightly entertained. The Bench further held that before initiating any inquiry, courts must first ascertain the facts from the concerned financial institutions rather than set the investigative process in motion based on speculation.

The petition was filed as a public interest litigation by Infrastructure Watchdog, alleging undervaluation and irregularities in the one-time settlement (OTS) agreements entered into between two public sector banks—the Bank of Maharashtra and Punjab National Bank—and a hotel company owning the Hyatt Regency Hotel in New Delhi. The petitioner contended that the OTS arrangements resulted in a loss to the public exchequer due to alleged undervaluation of the mortgaged property.

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It was claimed that earlier valuations in 2021 had placed the property’s worth at over ₹2,600 crores, while subsequent valuations in 2024 reduced it to around ₹865.77 crores. The petitioner relied on earlier sales and offers indicating higher per square foot rates to assert that the property was deliberately undervalued. Complaints were stated to have been made to the Central Vigilance Commission, the Ministry of Finance, the Central Bureau of Investigation, and other agencies, with no response allegedly received.

The petitioner sought the quashing of the OTS dated 24 January 2025 between the borrower and the Bank of Maharashtra and requested an investigation into the OTS agreements executed by both banks.

Both banks opposed the petition, asserting that the OTS decisions were taken after due diligence, multiple independent valuations, and approval by internal committees, including those comprising retired judicial officers. They maintained that the recoveries exceeded the outstanding ledger balance and that the process complied with the Reserve Bank of India’s guidelines. The respondents also objected that the petition failed to disclose the proper source of its information as required under Rule 9(i)(c) of the Delhi High Court (Public Interest Litigation) Rules, 2010, noting that merely referring to a “reliable whistleblower” was insufficient under the rule.

The Division Bench observed that “banks acting bona fide cannot be made answerable to the judiciary regarding the economic expediency of their decisions, except where cogent material is shown.” It recorded that the proceedings were “purely speculative in nature” and that “issuance of notice in such matters can have a serious debilitating effect on the entire banking and commercial infrastructure of this country.”

The Court stated that “easy allegations of financial impropriety by banks should not be entertained by courts,” emphasizing that the banking sector constitutes the “backbone of our economy.” It observed that “the petitioner has, merely on the basis of a valuation report submitted in respect of the hotel, presumed that the property was undervalued and, what is worse, that the banks were complicit in that regard.”

The Bench noted that the banks had engaged multiple valuers and subjected the OTS proposals to multi-level scrutiny, including review by a committee chaired by a retired High Court Judge. The Court stated, “for this Court to call upon the respondents to respond in such a case, the petitioner is required at least to set up a credible challenge to the decision of the respondent. Mere speculations, doubts and suspicions cannot vitalize this Court into calling for a response.”

It further recorded that “it is not open to anyone to institute a public interest litigation questioning the commercial expediency of private contracts, even if one of the parties to the contract is a public sector undertaking like a bank.” The judgment added that “the Court should satisfy itself that a case for taking cognizance is made out, rather than select the easy way out by mechanically issuing notice and calling for responses.”

The Court further observed: “Every such transaction would become vulnerable to be dragged into Court at the instance of persons who claimed to be public spirited citizens, with fragmentary information, on the basis of which a case for investigation by agencies such as the CVC and CBI is sought to be made out. We are clear in our minds that such attempts must be nipped in the bud. The Court should satisfy itself that a case for taking cognizance is made out, rather than select the easy way out by mechanically issuing notice and calling for responses.”

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The Bench also addressed the disclosure requirement under the Public Interest Litigation Rules, stating that “the reference to the source of the petitioner’s information as a ‘reliable whistleblower’ cannot be said to conform to the mandate of Rule 9(i)(c).” It added that while confidentiality may be protected in exceptional cases, “there can be no secrecy from the Court.”

The Bench stated that “there is no contumacious or culpable financial impropriety in the decision of the banks to enter into the OTSs” and observed that “a writ court cannot set aside a private contract executed between the parties.”

It recorded that “no case for granting the prayer for institution of an investigation into these matters by the CBI, CVC or any other agency is made out.” The judgment also noted that the petitioner had failed to meet the disclosure obligations required under the Public Interest Litigation Rules.

The Court held that “we do not find a case made out for issuance of notice in this writ petition. ”The writ petition is accordingly dismissed in limine.

Advocates Representing the Parties

For the Petitioner: Mr. Prashant Bhushan, Mr. Pranav Sachdeva, Mr. P. Rohit Ram, Mr. Abhay Nair, and Mr. Sanyam Jain, Advocates.

For the Respondents: Mr. Amit Tiwari, CGSC with Mr. Himanshu Bidhuri and Mr. Ayush Tanwar, Advocates for the Union of India; Mr. N. Venkatraman, ASG with Mr. Nishant Awana, Mr. Abhishek Singh, and Mr. S.K. Rout, Advocates for Bank of Maharashtra; Mr. R. Venkataramani, Attorney General of India with Mr. Alok Kumar, Ms. Parnika Jolly, and Mr. Tarun Kumar, Advocates for Punjab National Bank; Mr. Mukul Rohatgi and Mr. Rajiv Nayar, Senior Advocates with Mr. Sidhant Kumar, Mr. Saurabh Seth, Mr. Arpit Singh Arora, Ms. Devanshi Singh, Mr. Akshit Mago, Mr. Om Batra, Ms. Molly Agarwal, and Mr. Pratyush Srivastava, Advocates for Asian Hotels (North) Pvt. Ltd.; Mr. Ravinder Agarwal, Mr. Manish Kumar Singh, and Mr. Vasu Agarwal, Advocates for the CVC; Mr. Anupam S. Sharma, SPP with Ms. Harpreet Kalsi and Mr. Vashisht Rao, Advocates for the CBI.

Case Title: Infrastructure Watchdog v. Union of India & Ors.
Neutral Citation: 2025: DHC: 9577: DB
Case Number: W.P.(C) 4123/2025, CM APPLs. 19111/2025 & 19112/2025
Bench: Justice C. Hari Shankar and Justice Ajay Digpaul