Calcutta High Court Quashes SBI Fraud Classification Show Cause Notice Against Pincon Spirit Director

The Calcutta High Court has recently quashed the State Bank of India's December 2, 2025 show cause notice proposing to classify the loan account of Pincon Spirit Ltd. as fraud and proceed against its director, Monoranjan Roy.

The court held that the notice was founded on an inconclusive forensic audit that had been conducted without access to the company's complete financial records.

Justice Krishna Rao observed that the forensic auditor did not have the borrower's books and records while preparing the report. The court held that after the company entered liquidation, those records should have been obtained through the liquidator or, where necessary, the Directorate of Economic Offences.

"Considering the above, this Court finds that the Forensic Audit report on the basis of which the impugned show cause notice is issued, is not conclusive as the documents of the borrower was not available to the Forensic Auditor and the same is categorically reflected in the Forensic Audit report.", the court held.

The dispute arose after SBI issued a show cause notice on November 18, 2025 based on a forensic audit dated June 4, 2025. Roy replied on November 29, informing the bank that Pincon Spirit's records had been seized by the Directorate of Economic Offences after its directors were arrested in 2017.

He also stated that the company was under liquidation and could not access the records. SBI later withdrew the notice and issued another on December 2 containing substantially the same allegations, prompting Roy to move the High Court.

SBI argued that Roy had already been supplied with the forensic audit report and had submitted a detailed reply to the earlier notice. It also contended that he would have an opportunity to be heard before any decision was taken under the RBI framework and that the writ petition was therefore premature.

The court noted that once liquidation commenced, the liquidator became the sole custodian of the company's books of account, financial records and operational documents. It further observed that the audit report itself stated its conclusions were based on limited documents and remained subject to further findings once complete financial records became available.

Quashing the notice, the court clarified that SBI was free to initiate fresh proceedings in accordance with law. It observed that if the bank intended to rely on a forensic audit in the future, the auditor should first obtain the necessary records from the liquidator or the Directorate of Economic Offences before reaching a definite finding.

The court also directed Roy to furnish any documents in his possession, after verification by the liquidator, if requested by the auditor.

For Petitioner: Senior Advocates Joydip Kar, Rudraman Bhattacharyya, Biswaroop Bhattacharyya, Niladri Bhattacharjee, Subhrojyoti Mukherjee, Deblina Chattaraj, Sayan Banerjee, Suman Majumdar, Shraman Mukherjee

For SBI: Advocates Aman Agarwal, Debabrata Das, Arunabha Sarkar

For RBI: Advocate Patrick Acharjee