NCLT Dismisses Plea by Sri Adhikari Brothers Against Canara Bank’s Fraud Notice

The Mumbai Bench of the National Company Law Tribunal (NCLT) has rejected a request by Sri Adhikari Brothers Television Network Limited and its promoter Markand Navnitlal Adhikari to stop Canara Bank from acting on a Show Cause Notice (SCN) that classifies their account as “fraud.”

Sri Adhikari Brothers, an MSME, had entered the Corporate Insolvency Resolution Process (CIRP) in December 2019 after Canara Bank filed an application. The promoters later submitted a resolution plan which was approved by 93.5% of the Committee of Creditors (CoC), including Canara Bank, which held 40.55% voting share. This plan was also approved by NCLT in December 2023.

Despite this, Canara Bank issued an SCN to the company and its promoter in October 2024, based on a Transaction Audit Report from 2020, which examined certain suspicious transactions. The SCN was meant to determine whether fraud had occurred.

The company claimed the SCN was an afterthought since Canara Bank had the audit report for years but took no action earlier. A supplementary audit report from November 2023, based on new information, had no major findings and should have been considered. They argued that once the resolution plan was approved, Canara Bank had no right to issue a fraud notice, as the plan settled all its claims.

Canara bank argued that issuing the SCN was not a violation of the resolution plan or the Insolvency and Bankruptcy Code (IBC). It was done as per RBI’s Master Circular (July 2024) and backed by a Supreme Court judgment (SBI vs. Rajesh Agarwal). The SCN was just an initial step to examine potential fraud, which is separate from insolvency resolution.

NCLT has ruled in favor of Canara Bank. It clarified that the SCN was not about recovering money but to investigate fraud, which is allowed under RBI rules. The Tribunal found the company’s fears of the resolution plan being harmed were based on assumptions.

Since the matter was still in the preliminary stage, NCLT saw no reason to interfere. The Tribunal also rejected the company’s plea for a stay on the SCN and said the bank should continue following RBI procedures.