SC rejects 3 appeals against 'fraud' tag

New Delhi: Supreme Court Thursday dismissed three appeals filed by beleaguered industrialist Anil Ambani and Reliance Communications (RCom) for stay of proceedings related to 'fraud tagging' of their bank accounts following a forensic review of debts and alleged diversion and siphoning of loans by ADAG group to the tune of Rs 30,000 crore.

For 45-minutes, senior advocates Kapil Sibal, Shyam Divan and Narender Hooda laboured hard before a bench of CJI Surya Kant and Justices Joymalya Bagchi and Vipul M Pancholi to drive home the point that the financial audit of the accounts, as per RBI circular, can only be carried out by a qualified chartered accountant, a mandate which was violated by appointment of forensic auditor in BDO India LLP, which is not a CA.

The declaration of an account as fraud carries enormous civil and criminal consequences and hence the rule must be strictly adhered to, they argued. "It is a case of diversion and siphoning of thousands of crores of rupees from the bank loans. We do not want to express any opinion except saying that the decision of a division bench of the Bombay HC does not warrant any interference," the CJI-led bench said.

Appearing for a consortium of banks, including Bank of Baroda, Indian Overseas Bank and IDBI, solicitor general Tushar Mehta said the forensic auditor is an expert in the field and carries high reputation in India and abroad. The bench said, "The division bench has considered in detail the inappropriateness of single judge bench granting stay on the 'fraud tagging' proceedings and found that the petitioners do not even have a prima facie case."

When Sibal said that declaring an account fraudulent would mean financial assistance cannot be availed by the person or company, the bench said, "If there is a procedural flaw in declaring your accounts fraudulent, then in the pending suit you will have the right to seek a fresh audit."

After failing to convince the bench to grant relief to Ambani and RCom, Sibal said Ambani is ready to discuss with banks and settle the outstanding amount. "The banks have settled such cases earlier. I can offer Rs 5,000-8,000 crore for settlement. Please record this in the court order," Sibal requested.

Mehta opposed even recording of Ambani's statement on willingness to settle saying this would be used as a window to reopen the entire case and start new litigations. The bench recorded Ambani's statement but clarified it has expressed no opinion on it.
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