Mumbai, Jan 12: A consortium of public sector banks on Monday urged the Bombay High Court to lift the stay on proceedings to declare the accounts of industrialist Anil Ambani and Reliance Communications Ltd (RCom) as fraud.
The banks termed the single judge’s previous order restoring “status quo ante” as perverse, arguing that the court had wrongly held the forensic audit, which led to the fraud declaration, to be invalid as per RBI rules.
Background of the case
In December 2025, Justice Milind Jadhav had stayed all present and future actions initiated by three public sector banks against Ambani and RCom. At the time, the High Court observed that the banks’ action was founded on a forensic audit report that did not comply with the statutory requirements under the RBI’s 2024 Master Directions. The audit report was prepared by an external auditor, BDO LLP, instead of a chartered accountant, Ambani had said.
Banks defend forensic audit
During Monday’s hearing, the banks argued that the forensic audit, which led to the loan accounts being classified as “fraud”, was legally valid and based on serious findings of fund siphoning and misutilisation.
A bench of Chief Justice Shree Chandrashekhar and Justice Gautam Ankhad was hearing the appeals filed by the SBI, Bank of Baroda, Indian Overseas Bank and IDBI Bank against the December order.
Appearing for the banks, Solicitor General Tushar Mehta said the entire controversy arose from a forensic audit conducted by BDO LLP, which was engaged by all four lending banks with the SBI as the lead banker.
“BDO submitted its report on October 15, 2020. It records siphoning of funds, misutilisation of funds and use of loan amounts for purposes other than what was sanctioned for,” Mehta told the court.
Show-cause notice and fraud tag
He said that based on the report, the SBI issued a show-cause notice in December 2020 and subsequently classified the accounts as fraud. “There are a large number of frauds taking place. It was decided to act so that others (banks) would not face a similar situation,” Mehta said.
The main challenge by Ambani, he added, was not to the audit findings but to its form. “The audit is attacked on a technical ground—that it was not conducted by a chartered accountant,” Mehta argued.
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Court’s earlier observations
While staying the banks’ move, Justice Jadhav had agreed with Ambani’s point and noted that the report was not authored and signed by a duly qualified chartered accountant, as required by the RBI directions. Referring to a Supreme Court ruling, the judge had noted that the account holder must be given an opportunity of hearing.
To this, Mehta asserted, “Only the procedure changed; from no hearing to a hearing. The classification itself was never invalidated.”
Hearing to continue
The court will continue hearing the appeals on January 14.
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