Bombay HC Dismisses Anil Ambani’s Plea Against SBI Classifying Reliance Communications Loan Account As ‘Fraudulent’

Mumbai: In a major setback to industrialist Anil Ambani, the Bombay High Court on Friday dismissed his plea challenging the State Bank of India’s (SBI) decision to classify his loan account as “fraudulent.” The account pertained to his firm, Reliance Communications (RCom), which is already under insolvency proceedings.

Bench Statement

A bench of Justices Revati Mohite Dere and Neela K Gokhale rejected Ambani’s petition, stating: “There is no merit in the petition. Petition is dismissed.”

SBI and RBI Guidelines

SBI issued the order in June this year, following a Reserve Bank of India (RBI) master circular that allowed banks to classify any account as fraudulent and provided guidelines for the process.

This decision by the RBI on fraud risk management in banks was undertaken under the Reserve Bank of India (Frauds Classification and Reporting by Commercial Banks and Select FIs) Directions, 2016. The RBI had further instructed banks to establish their own policies.

The RBI’s master circular permits banks to fully utilise the Central Fraud Registry for prompt identification, monitoring, reporting, control and mitigation of fraud-related risks. Once an account is designated as fraudulent, the bank must report it to the Central Repository of Information on Large Credits platform to notify other banks. Moreover, if a bank directly classifies or categorises an account as fraudulent, it is required to inform the RBI within 21 days and report the matter to an investigating agency.

Allegations of Misappropriation

According to SBI, Ambani had misappropriated funds by entering into transactions that violated loan terms, leading to a loss of over Rs2,929 crore. Following the bank’s complaint, the Central Bureau of Investigation (CBI) searched RCom premises as well as Ambani’s residence. In August, the CBI registered a case against him and the company for alleged bank fraud based on SBI’s complaint.

Arguments and Representation

During the hearing, senior advocates Darius Khambata and Prateek Seksaria, representing Ambani, argued that the bank had acted arbitrarily and without following due process in declaring his account fraudulent. They contended that such a move could have severe consequences on Ambani’s ability to avail banking facilities. However, SBI’s counsel, senior advocate Aspi Chinoy, defended the order, insisting it was issued in compliance with RBI directions.

Other Banks’ Actions

Meanwhile, other nationalised banks had also issued similar orders against Ambani’s loan accounts related to RCom.

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In July, Canara Bank informed the HC that it had withdrawn its earlier order classifying Ambani’s RCom account as fraudulent. Last month, the court had restrained Bank of Baroda from taking coercive steps against him, granting him temporary relief.

Ambani’s Response

A spokesperson for Anil Ambani stated, “We are awaiting the order. Once we have reviewed it, we will evaluate the next course of action, as legally advised.”

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