The Karnataka High Court on Wednesday ordered issue of notices to the Ministry of Finance and the Reserve Bank of India on a petition seeking cancellation of Axis Bank’s licence.

Justice AS Bopanna passed the order on a petition filed by Lotus Shopping Centre Pvt Ltd, a developer of malls. The Court also ordered issue of notice to Axis Bank. The petitioner company has sought a direction to order a probe into the affairs of the bank through the RBI or an agency like the CBI. It claimed that a ₹300-crore mall project of the petitioner at Mangaluru city suffered a loss due to “illegal and unilateral suspension of disbursement of loan by Axis Bank to the project.”

The bank had sanctioned ₹150-crore loan to the project but had suspended after releasing only ₹100 crore without any valid reason, and had violated norms governing sanctioning of loans, laid down by the RBI, the petitioner contended. The petitioner also alleged that Axis Bank has indulged in “fraudulent” activities with an ulterior motive to sell valuable property of the former as a distress sale.

Pointing out that the petitioner itself had arranged ₹141 crore from investors for the projects, it was said that officials of the Axis Bank created a situation to sell the project as a “distress sale” through fraudulent means even though the petitioner had provided sufficient security, which was nearly two times the project value. The bank had forced the petitioner to borrow money from private lenders at an exorbitant rate of interest of 36 per cent, it was said.

The petitioner has also sought a direction from the court to the Centre to initiate criminal prosecution against the officials who were responsible for the alleged fraud. The RBI has not initiated any action against the Axis Bank even though the alleged violations were brought to its notice, the petitioner claimed.