Bombay high court allows banks appeals against Anil Ambani relief over forensic audit 'fraud' tag

MUMBAI: In a setback to Anil Ambani and his company, Reliance Communications, the Bombay High Court on Monday allowed appeals filed by 3 banks and an external forensic auditor firm, BDO India LLP, against relief that a single Judge granted Anil Ambani last December by over a forensic audit that led to fraud account tagging action. The HC Chief Justice Shree Chandrashekhar and Justice Gautam Ankhad set aside as "illegal'' and "perverse'' the interim order that had interim order that had restrained the banks from taking action against Ambani’s accounts based on a forensic audit report (FAR) of 2020.The 3 banks, IDBI Bank, Bank of Baroda and Indian Overseas Bank, last month appealed against the order Justice Milind Jadhav. On Monday, after the Banks' appeals were allowed, Ambani's counsel Mayur Khandeparkar and Ameet Naik sought a stay of four weeks to go before the Supreme Court. The Chief Justice-led bench denied any stay of its order, saying, since it has already held that Justice Jadhav's order "suffers from procedural irregularity and illegality, staying the operation of this judgment shall amount to continuing the illegal order for the next four weeks and perpetuate the illegality.''The SBI, was a lead bank, in a consortium of 20 banks, as lenders of RCOM, RTL and RITL. Their total exposure for these 3 companies was a loan worth Rs 31,580 crore the HC had earlier noted..Banks said the challenge raised by Ambani to the 2020 FAR was belated. They also said SBI on June 13, 2025 declared RCOM and Ambani as “fraud”, and the HC last October dismissed a challenge raised by Ambani to the SBI action, pursuant to which Ambani this year filed a suit against SBI raising a similar challenge to BDO’s qualification and eligibility to conduct a forensic audit.The consequence of a “fraud” tag by SBI was that RBI norms kicked in and Ambani was debarred from raising additional credit from banks for 5 years.While Justice Jadhav agreed with Ambani’s contention that the FAR 2020 report essentially flouted a 2024 Master Direction issued by the Reserve Bank of India on “Fraud Risk Management in commercial banks”, the appeal bench agreed with the banks’ and BDO’s submissions that, by the December order, “the RBI master circular of 2024 has been given a retrospective effect, which is patently impermissible”.BDO said its appointment flouted no RBI guidelines as they then existed.Solicitor General Tushar Mehta, representing 1 of the banks in the appeal hearing last month, argued that unless the order was stayed, it would lead to “disastrous” consequences. BDO, represented by counsel Mustafa Doctor and Kunal Dwarkadas and RJD and Partners, and banks represented by MDP Legal and advocates Yogesh Pirthani and Rishi Thakur, also adopted Mehta’s contention that Justice Jadhav’s findings were not based on facts pleaded in the suit filed by Ambani or argued in court during the hearing of his plea for interim relief.The audit report pointed to findings on facts, including that funds “were misused” and “siphoned off”, Mehta submitted, also arguing that Ambani never challenged the FAR on merits.The report by an external auditor was under a 2016 RBI circular, which was complied with, which was the banks’ case.Ambani, through senior counsel Mukul Rohatgi contended that the 2024 RBI Master Directions mandatorily superseded the earlier 2016 directions and 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).