No Cognizance Without Credible Material: Delhi High Court’s No‑Notice Threshold for PILs Challenging Bank OTS Deals and Mandatory Source Disclosure

No Cognizance Without Credible Material: Delhi High Court’s No‑Notice Threshold for PILs Challenging Bank OTS Deals and Mandatory Source Disclosure

Case: Infrastructure Watchdog v. Union of India & Ors., 2025 DHC 9577-DB

Court: Delhi High Court (Division Bench)

Bench: Justice C. Hari Shankar and Justice Ajay Digpaul

Date: 3 November 2025

Proceeding: W.P.(C) 4123/2025, CM APPLs. 19111/2025 & 19112/2025

Introduction

This judgment draws a sharp doctrinal boundary around the use of public interest litigation (PIL) to interrogate high-value commercial decisions in the banking sector, especially One-Time Settlements (OTS) with distressed borrowers. The petitioner, Infrastructure Watchdog, sought to (i) quash the Bank of Maharashtra’s (BOM) OTS with Asian Hotels (North) Pvt. Ltd. (AHN), owner of the Hyatt Regency at Bhikaji Cama Place, New Delhi, and (ii) trigger investigations by the Ministry of Finance (MoF), Central Bureau of Investigation (CBI), and Central Vigilance Commission (CVC) into OTS arrangements with BOM and Punjab National Bank (PNB), alleging gross undervaluation of the underlying hotel asset.

The respondents—including the Union of India (MoF), PNB, BOM, AHN, as well as pro forma parties CVC and CBI—opposed even the issuance of notice. They urged that entertaining such PILs on speculative allegations would destabilize bona fide banking operations, de-incentivize commercial decision-making, and chill legitimate OTS activity—an integral component of the credit ecosystem’s stress resolution toolkit.

The case presented two intersecting issues of systemic importance:

  • What threshold must a PIL meet before the Court even issues notice in matters alleging financial impropriety in private/commercial arrangements, especially where nationalized banks are counterparties?
  • What procedural discipline should govern PIL pleadings—particularly disclosure of sources under the Delhi High Court PIL Rules, and the “regulator-first” principle—when petitioners seek to initiate CBI/CVC investigations?

Summary of the Judgment

  • Dismissal in limine; no notice issued: The Court refused to issue notice and dismissed the PIL at the threshold, characterizing it as speculative and unsupported by credible material. It emphasized that mere suspicions, fragmentary facts, or conjecture cannot activate writ jurisdiction, especially to seek initiation of criminal or vigilance investigations.
  • No writ to quash private commercial contracts: The Court reaffirmed that writ courts do not set aside private contracts, including OTS agreements between banks and borrowers, absent demonstrable illegality, mala fides, or violation of public law norms. An OTS—even when one counterparty is a PSU bank—remains a commercial decision not amenable to PIL scrutiny on “expediency” or valuation grounds.
  • Regulator-first and alternative route: The Court insisted that petitioners must first approach appropriate regulators/authorities and await meaningful responses; courts will not act as “super regulators.” Failure to do so, or to wait a reasonable period, undermines the maintainability of such PILs.
  • No direction to initiate investigation: Citing binding precedent, the Court held that writ courts cannot direct initiation of investigations by the CBI/CVC on mere allegations; such directions are proscribed absent ongoing investigations and concrete violations of fundamental rights.
  • Right to reputation and social media caution: Recognizing reputation as a facet of Article 21, the Court underscored the severe, often irreparable harm of precipitously entertaining allegations in the social media age.
  • Mandatory source disclosure in PILs: The Court flagged non-compliance with Rule 9(i)(c) of the Delhi High Court (Public Interest Litigation) Rules, 2010. Identifying a source merely as a “reliable whistleblower” is inadequate. Where disclosure might jeopardize safety, the Court may permit sealed/confidential disclosure—but secrecy from the Court is impermissible.

Factual Background

AHN had availed loans from multiple banks including BOM and PNB. Amid financial stress, AHN sought OTS in 2024–2025. Earlier (2021) valuations by private valuers for moratorium extensions had indicated very high values (circa ₹2,600–2,651 crores), but subsequent valuations obtained during OTS consideration (2024) were much lower (circa ₹876–₹1,019 crores realized value ranges). BOM approved AHN’s OTS; PNB had approved and issued “no dues.” BOM reported recovering 116% of ledger balance (₹263.45 crores), with charges released pursuant to a separate High Court order.

The petitioner alleged deliberate undervaluation, citing past transactions/offers (sale of upper floors in 2020; a 2021 shopping arcade offer; neighboring NBCC sale prices) and contended violations of RBI’s 8 June 2023 instructions purportedly requiring maximization of recovery in OTS. The petitioner also made sweeping assertions about shareholding changes, FAR entitlements, and alleged diversion through affiliates, but these were either outside the writ’s prayers, stale, or presented without antecedent representations to competent authorities.

BOM and PNB responded (through written submissions and at the Bar) that:

  • Multiple independent valuations were commissioned at the JLM (joint lender) and bank levels, including from R.K. Associates, Kanti Karamsey & Co., Sapient Services, and Universal Consultants & Valuers.
  • Earlier high valuations had material errors: treating the hotel as unrestricted commercial property (instead of hotel-restricted use); including Tower A that was not mortgaged; ignoring AAI’s refusal of height clearance affecting FAR; heavy MCD dues/charges; refurbishment capex (~₹300 crores); and pending litigations. Adjusting for these significantly revised realizable value.
  • Internal sanction architecture was robust: BOM’s two-tier process (SAC with a retired High Court Judge and a retired PSU Bank GM; followed by a Special Committee of the Board for Compromise including independent directors and key executives) scrutinized and approved the OTS.
  • A forensic auditor appointed in related proceedings (CS (Comm) 128/2022) found no siphoning/diversion.

Analysis

Precedents Cited and Their Influence

  • Subramanian Swamy v. Union of India, 2024 SCC OnLine Del 5706 (DB): The Division Bench had declined PIL scrutiny over private, regulator-governed commercial transactions (share acquisitions/valuations) emphasizing that writ courts are not “super regulators,” mandamus is not a tool to enforce private contracts, and sectoral regulators (SEBI/RBI/IRDAI) must be approached first. The present Bench characterized the instant case as “visually identical,” extending this principle to bank OTS decisions.
  • BALCO Employees Union v. Union of India, (2002) 2 SCC 333; Vivek Narayan Sharma v. Union of India, (2023) 3 SCC 1: Classic deference to economic policy and complex financial decision-making. The Court drew on these authorities to resist judicial second-guessing of commercial wisdom, especially valuation and recovery strategies in OTS.
  • State of M.P. v. Narmada Bachao Andolan, (2011) 7 SCC 639; Manohar Lal Sharma v. Narendra Damodardas Modi, (2019) 3 SCC 25: Courts eschew roving/fishing inquiries into policy-laden or specialized technical decisions (e.g., Rafale case), a principle transposed here to reject a generalized demand for a CBI/CVC probe into a bank’s OTS determination.
  • Rajeev Suri v. DDA, (2022) 11 SCC 1; Jagdish Mandal v. State Of Orissa, (2007) 14 SCC 517: Non-interference in tenders/awards absent mala fides or perversity; analogous caution against intruding into commercial expediency or substituting judicial views for expert/administrative assessment.
  • Kunga Nima Lepcha v. State Of Sikkim, (2010) 4 SCC 513; State of Jharkhand v. Shiv Shankar Sharma, (2022) 19 SCC 626:
    • Courts cannot, in writ jurisdiction, order initiation of a criminal/vigilance investigation by CBI/CVC on bare allegations; writ courts may monitor or transfer only where an investigation already exists and integrity concerns arise.
    • High Courts must dismiss PILs at threshold if premised on vague, generalized accusations; petitioners must show credentials, prima facie evidence, and prior resort to statutory mechanisms.
  • Subramanian Swamy v. Union of India, (2016) 7 SCC 221: Right to reputation is a component of Article 21. The Bench invoked this to highlight the severe, irreparable harm of entertaining speculative accusations in the “age of social media overreach.”

These authorities collectively drove three doctrinal outcomes: a high pre-notice threshold for PILs involving commercial banking; a proscription on using writs to launch investigations; and a regulator-first discipline that prioritizes institutional forums before judicial review.

Legal Reasoning

  1. Pre-notice screening and “no cognizance without credible material”: Issuing notice itself can destabilize financial actors and crater reputations. The Court adopted a strict threshold: unless a petitioner shows a credible prima facie case—grounded in concrete material, not speculations—the Court should not trigger the “judicial ball rolling.” Here, the petitioner relied on stale or non-comparable benchmarks (a 2020 partial floor sale; a 2021 unmaterialized offer; neighboring NBCC sale metrics) to infer undervaluation in 2024–2025 OTS valuations, ignoring intervening restrictions (AAI clearance/FAR, MCD dues, refurb costs, litigations) and misclassifications highlighted by multiple independent valuers. No credible basis existed to even call for a response.
  2. PIL is not a portal for roving inquiries into private commercial decisions: The OTS is a commercial arrangement. Courts cannot evaluate economic expediency or valuation choices absent illegality or mala fides. Profit maximization is not a legal duty; the law expects diligence, multi-source valuation, internal control, and reasoned decision-making—standards the banks met.
  3. Regulator-first route and ripeness: The petitioner sent a flurry of representations (11–14 March 2025) and rushed to Court on 2 April 2025 without awaiting substantive responses. This undercut ripeness and flouted the regulatory-primacy framework the Court has consistently enforced in commercial PILs.
  4. No writ to initiate CBI/CVC investigations: On Kunga Nima Lepcha/Shiv Shankar Sharma principles, writ courts cannot order initiation of investigations; the petitioner must approach statutory bodies and pursue remedies under codes like the Criminal Procedure Code/Bharatiya Nagarik Suraksha Sanhita or sectoral statutes (e.g., Companies Act, RBI framework), unless a pending investigation’s integrity is itself at risk.
  5. Procedural discipline—PIL Rules compliance: Rule 9(i)(c) requires meaningful disclosure of sources of non-public information. “A reliable whistleblower” is insufficient. Where safety is at risk, sealed/confidential disclosure to the Court may be allowed, but secrecy from the Court cannot be claimed.
  6. Systemic concerns and proportionality: The Court foregrounded the macroeconomic risks: entertaining speculative PILs can jeopardize OTS frameworks, depress bank risk-taking, and invite blackmail via litigation threat. Proportionality demands restraint unless the petitioner establishes a solid factual and legal predicate.

Impact and Significance

  • Higher entry barrier for commercial-banking PILs: Petitioners challenging OTS/valuations must marshal cogent, contemporaneous, and comparable material showing prima facie irregularity (e.g., demonstrably flawed valuation methodology; breach of RBI directives; irregular committee process; documented mala fides). Bare arithmetic from unrelated transactions will not pass the pre-notice filter.
  • Institutional confidence in OTS regime: The ruling shields bona fide OTS decisions from litigation-driven paralysis. Banks can rely on multi-valuer assessments and layered committee approvals without fear of being second-guessed by PILs absent clear illegality.
  • Procedural rigor—source disclosure practice reset: The insistence on Rule 9(i)(c) compliance (with a calibrated sealed-cover option where warranted) will likely tighten PIL drafting, discourage rumor-fed pleadings, and improve the informational quality of public interest litigation.
  • Clarified limits on writ-driven investigations: The judgment consolidates Supreme Court authority to prevent writ courts being used as launchpads for criminal/vigilance probes. Petitioners must first utilize statutory channels; writ intervention, if any, is exceptional and usually supervisory.
  • Balanced approach to transparency and reputation: While stressing openness to genuine public-interest exposés of corruption, the Court integrates the right to reputation and the risks of social media amplification into its proportionality calculus. The message is not “hands off,” but “come prepared.”

Complex Concepts Simplified

  • One-Time Settlement (OTS): A negotiated compromise between a borrower and a lender to settle outstanding dues, often at a discounted figure, based on realizable value, enforcement timelines, litigation risk, and cost considerations.
  • Ledger balance vs. recovery percentage: The ledger balance is the book outstanding. A bank may report recovery “above 100% of ledger” if negotiated payments (sometimes including interest/charges) exceed that book figure, even if lower than some earlier aspirational valuations.
  • Market value vs. realizable value: Market value is the theoretical price in a normal sale. Realizable value discounts for use restrictions (e.g., “hotel only”), encumbrances (unmortgaged portions like Tower A), regulatory constraints (AAI height/FAR), statutory dues (MCD), refurbishment capex, litigation risk, and time value of money—critical in OTS decisions.
  • FAR and AAI height clearance: Floor Area Ratio dictates permissible construction volume. Without AAI clearance, promised FAR may be unusable, materially affecting value.
  • Writ of mandamus and private contracts: Mandamus enforces public duties, not private contractual rights. Even where a PSU bank is a party, an OTS remains a commercial decision unless tainted by illegality, mala fides, or breach of public law norms.
  • “Issuance of notice” vs. “taking cognizance”: In PILs, even issuing notice can inflict reputational and operational harm. This judgment adopts a “no cognizance without credible material” posture—dismissing weak PILs at the gate.
  • Rule 9(i)(c), Delhi High Court PIL Rules, 2010: Requires petitioners to disclose sources of non-public information. “Reliable whistleblower” is inadequate; the Court may accept sealed/confidential disclosure where safety concerns exist, but the Court itself must know the source.

Practical Guidance Emerging from the Judgment

  • For petitioners:
    • Exhaust regulator routes (RBI, CVC, CBI, sectoral regulators) with detailed, document-backed complaints and allow reasonable time for responses.
    • Provide contemporaneous, comparable valuation evidence and demonstrate methodological errors, regulatory breaches, or mala fides—mere price comparisons with unrelated or outdated transactions will not suffice.
    • Comply strictly with PIL Rules; disclose sources meaningfully (use sealed/confidential disclosure where safety is implicated).
    • Narrow reliefs to public law issues; do not frame the Court as an enquiry commission for commercial expediency.
  • For banks and PSU lenders:
    • Maintain robust OTS records: multi-valuer reports; committee minutes; identification and correction of valuation errors (use restrictions, encumbrances, statutory dues, regulatory constraints).
    • Articulate recovery rationale: enforcement timelines, NPV analysis, litigation risk, refurbishment capex, and rationale for the chosen settlement over alternatives (SARFAESI/IBC/ARC sale).

What the Court Did Not Decide

  • It did not adjudicate on the correctness of any particular valuation figure; it assessed only the adequacy of process and material at the threshold.
  • It did not hold that OTS decisions are immune to judicial review; it set a rigorous evidentiary and procedural threshold for PILs.
  • It declined to entertain allegations about older transactions and alleged diversions not within the pleadings/reliefs or not first raised with competent authorities.

Conclusion

This decision is a clear restatement—and a sharpening—of three pillars of Indian PIL jurisprudence in commercial contexts: (1) a stringent pre-notice threshold of credible, specific material; (2) a firm regulator-first pathway that respects sectoral expertise and separation of powers; and (3) a categorical bar on using writ jurisdiction to initiate criminal/vigilance investigations or to rewrite private commercial contracts such as OTSs.

The Court’s insistence on meaningful source disclosure under Rule 9(i)(c) adds a procedural guardrail, likely to recalibrate PIL practice in Delhi by filtering rumor-driven filings. At the same time, the Bench leaves the door open for well-prepared public-interest challenges to genuine malfeasance: where petitioners assemble cogent evidence of regulatory breach or mala fides and pursue statutory routes first, writ courts remain available as a backstop.

For the banking sector, the ruling reinforces confidence in OTS-based recoveries and the use of multiple valuations, layered scrutiny, and internal governance structures. For public law, it is a timely reminder that, in the “age of social media overreach,” courts must guard both systemic stability and the fundamental right to reputation by refusing to energize speculative PILs.

Key Citations

Case Details

Year: 2025
Court: Delhi High Court

Judge(s)

Justice Ajay Digpaul

Advocates

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