Bombay High Court Reverses Decision, Permits Banks to Act Against Anil Ambani Over Fraud Allegations
In a significant legal development, the Bombay High Court has delivered a setback to industrialist Anil Ambani and his company, Reliance Communications (RCOM). On Monday, the court allowed appeals filed by three banks and external forensic auditor BDO India LLP, effectively overturning the interim relief granted to Ambani last December by a single judge. This ruling reinstates the banks' ability to take action based on a 2020 forensic audit report that tagged accounts as fraudulent.
Background of the Banking Consortium and Financial Exposure
The case involves a consortium of 20 banks, led by the State Bank of India (SBI), which were lenders to RCOM, Reliance Telecom Limited (RTL), and Reliance Infratel Limited (RITL). Their total exposure to these three companies amounted to a staggering Rs 31,580 crore. The appeals were specifically filed by IDBI Bank, Bank of Baroda, and Indian Overseas Bank, challenging the interim relief provided in December 2025 by Justice Milind Jadhav. That earlier order had restrained the banks from acting against Ambani's accounts based on the 2020 forensic audit report (FAR).
Key Arguments from Banks and BDO India LLP
The banks argued that Ambani's challenge to the 2020 FAR was belated and highlighted that SBI, on June 13, 2025, had officially declared RCOM and Ambani as "fraud." This declaration triggered Reserve Bank of India (RBI) norms, debarring Ambani from raising additional credit from banks for five years. Solicitor General Tushar Mehta, representing one of the banks during the appeal hearing, contended that Justice Jadhav's order would lead to "disastrous" consequences if not stayed. He emphasized that the audit report pointed to findings of fact, including misuse and siphoning off of funds, and noted that Ambani never challenged the FAR on its merits.
BDO India LLP, represented by counsel Mustafa Doctor, Kunal Dwarkadas, and RJD and Partners, supported the banks' stance. They argued that their appointment as external forensic auditor did not violate any RBI guidelines as they existed at the time and that Justice Jadhav's findings were not based on facts pleaded in Ambani's suit or argued in court. The banks maintained that the external auditor's report was conducted under the 2016 RBI circular, which had been fully complied with.
Ambani's Defense and Legal Contentions
Anil Ambani, through senior counsel Mukul Rohatgi and Naik, Naik and Company, contended that the 2024 RBI Master Directions superseded the earlier 2016 directions. He argued that these new directions required an "external auditor" appointed for forensic audits to be an auditor under the Companies Act, meaning they must be registered with the Institute of Chartered Accountants of India (ICAI). The 2024 RBI directions provide a comprehensive framework for fraud risk management in commercial banks, focusing on prevention, early detection, and timely reporting to law enforcement agencies.
Justice Jadhav, in his initial ruling, agreed with Ambani's contention that the FAR 2020 report flouted the 2024 Master Direction. He cited meeting minutes indicating that BDO LLP was already involved with lender banks before its appointment as External Forensic Auditor on May 7, 2019, and noted that the banks followed no prescribed procedure or timeline. He reasoned that allowing banks to proceed based on the FAR would have "virtually drastic" consequences, such as blacklisting.
Appeal Bench's Decision and Implications
The appeal bench, comprising Chief Justice Shree Chandrashekhar and Justice Gautam Ankhad, sided with the banks and BDO. They agreed that Justice Jadhav's order gave retrospective effect to the 2024 RBI master circular, which they deemed "patently impermissible." The judgment, pronounced by the Chief Justice, will be available soon, marking a pivotal moment in this high-profile financial dispute.
This ruling underscores the ongoing legal battles in India's corporate sector and highlights the stringent enforcement of banking regulations. It also reflects the complexities involved in forensic audits and the interpretation of RBI guidelines, with significant implications for credit access and fraud management in the banking industry.
