Bombay HC Sets Aside Bank Of India's Fraud Classification Of Kishore And Rakesh Biyani's Accounts, Cites Unreasoned Order

Mumbai, July 10, 2026: The Bombay High Court has set aside Bank of India's decision to classify the accounts of Kishore Biyani and Rakesh Biyani, promoters of Future Lifestyle Fashions Ltd (FLFL), as "fraud", holding that the bank failed to provide reasons for its decision as required under the Reserve Bank of India's 2024 Fraud Master Directions.

A bench of Justices B.P. Colabawalla and Firdosh Pooniwalla quashed the bank's order dated June 21, 2025, observing that it was "wholly unreasoned" and contrary to the RBI framework.

Petition Challenges Fraud Classification

The Biyani brothers had challenged the fraud classification order, the earlier show-cause notice and the forensic audit report dated August 7, 2024. They also sought directions restraining the bank from acting on the order, including reporting their names to the RBI's Central Fraud Registry.

Future Lifestyle Fashions Ltd had availed of credit facilities from Bank of India, with Kishore Biyani acting as guarantor. After the company's account was declared a non-performing asset, the bank ordered a forensic audit and later classified the account as fraud.

The petitioners argued that the bank's order merely reproduced portions of the forensic audit report and did not independently explain why the account was being classified as fraud. They also submitted that the company's Managing Director had filed a detailed reply to the show-cause notice, but the bank failed to consider it while passing the order.

Court Finds Order Unreasoned

Bank of India contended that the Biyani brothers had not filed their own reply to the show-cause notice and could not rely on the Managing Director's response. It further argued that the forensic audit itself contained sufficient reasons to justify the fraud classification.

Rejecting the bank's stand, the High Court said the RBI's Fraud Master Directions require banks to pass a reasoned order before classifying an account as fraud.

“When one peruses the impugned order... it is clear that it is bereft of any reasons as to why the accounts of the company as well as that of the Petitioners are classified as ‘fraud’,” the bench observed.

“The impugned order cannot be sustained as it is wholly unreasoned and contrary to the mandate of the Fraud Master Directions, 2024,” the court added.

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Fresh Proceedings Permitted

The court also directed Bank of India to ensure that the names of Kishore and Rakesh Biyani are not reflected as "fraud" in the RBI's Central Fraud Registry. It, however, clarified that the bank is free to initiate fresh proceedings in accordance with the 2024 Fraud Master Directions.

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