RBI fraud circular: Banks, auditor ask Bombay High Court to lift stay shielding Anil Ambani

Banks including Bank of Baroda, IDBI Bank and Indian Overseas Bank, along with audit firm BDO India LLP, have moved a Division Bench of the Bombay High Court seeking to overturn an interim order that bars action against businessman Anil Ambani under the Reserve Bank of India’s 2024 Master Directions on fraud classification.

The appeal was heard on Monday, January 12, by a bench led by Chief Justice Shree Chandrashekhar and Justice Gautam Ankhad, reported Bar and Bench. The court is scheduled to continue hearing arguments on Wednesday, January 14.

Single-judge order under challenge

The matter arises from an earlier ruling by Justice Milind Jadhav, who had restrained the banks from proceeding against Ambani after taking a prima facie view that the forensic audit relied upon did not comply with the RBI’s 2024 framework.

As per the order, forensic audit reports used to classify an account as fraudulent must be prepared by a statutory auditor registered with the Institute of Chartered Accountants of India (ICAI).

In Ambani’s case, the judge observed that the forensic audit report, dated October 2020 and relating to Reliance Communications and group entities, was signed by a person not registered with the ICAI.

On that basis, the court stayed all coercive steps by the banks that flowed from the report, as per Bar and Bench.

Banks term suit time-barred

Challenging this stay, Solicitor General Tushar Mehta, appearing for the banks, argued before the Division Bench that Ambani’s suit was “hopelessly time-barred” and founded entirely on information obtained through a third-party RTI application seeking BDO’s registration details.

"The entire purported cause of action is premised on this RTI application and the Institute’s response," he submitted, as per Bar and Bench.

Mehta further contended that Ambani had long been aware of the forensic audit and had not disputed its conclusions.

"Only ground is he (auditor) is not a member of the Chartered Accountants Institute. It is as simple and as absurd as that," he added.

He warned that allowing the interim stay to continue would undermine the RBI’s Master Directions, which bar individuals classified as fraud from accessing credit markets for five years.

He cautioned that the order could trigger widespread litigation and unsettle earlier fraud classifications, stating, "This BDO is an approved forensic auditor by SEBI. It is not just a nobody picked from the street," and urged the Division Bench to suspend the single-judge order pending final adjudication.