Bombay HC stays fraud classification against Anil Ambani, RCom
What's the story
The Bombay High Court has stayed the action of three banks to classify the accounts of Anil Ambani and his company Reliance Communications Ltd as 'fraud.' The court noted that the banks had violated the RBI's Master Directions in their actions. The stay was granted by Justice Milind Jadhav, who observed that a forensic audit report prepared by external auditor BDO LLP was not signed by a qualified chartered accountant (CA), as required under RBI's 2024 Master Directions on fraud.
Impact assessment
Court highlights potential consequences of fraud classification
The court emphasized that if interim relief wasn't granted to Ambani and Reliance Communications, it could lead to "grave and irreparable harm/loss." Justice Jadhav said principles of natural justice dictate that a forensic audit report prepared by an external auditor can't be relied upon by banks to issue a show-cause notice. He further stressed the mandatory nature of RBI Master Directions, which require banks to appoint auditors strictly in accordance with applicable law.
Consequence warning
High court warns against drastic consequences of fraud classification
The Bombay High Court warned that allowing banks to classify the accounts of Ambani and his company as fraud could have "drastic and disastrous consequences." These could include being blacklisted, barred from new bank loans/credit for years, criminal FIR filing, reputation damage, and violation of fundamental rights to financial access. The court also criticized the banks for their delayed action against Ambani and his company.