Bombay High Court Stays Fraud Proceedings Against Anil Ambani Over Prima Facie Defective Forensic Audit

The Bombay High Court on Wednesday stayed fraud classification proceedings initiated by Indian Overseas Bank, IDBI Bank and Bank of Baroda against Anil Ambani, founder and chairman of the Reliance Group, after prima facie finding serious defects in the forensic audit relied upon by the banks. A single-judge bench of Justice Milind N. Jadhav, while granting interim relief, held that the forensic audit report dated October 15, 2020, prepared by BDO LLP, was “not being in consonance with the RBI Master Directions”. The court held that appointment of BDO LLP as forensic auditor did not conform to the statutory qualification requirements applicable under the Companies Act. It further observed that such non compliance can have disastrous results. “Appointment of Auditor, whether internal or external even under the 2016 RBI Master directions has to conform to the applicable / relevant statute namely the Companies Act. It will otherwise lead to a disastrous situation wherein there will be a clear dichotomy for appointment of statutory Internal Auditor and External Forensic Auditor as any unqualified person having vast experience can get appointed in that case at the discretion of the Bank. This is not permissible", it said.The petition arose from show cause notices issued in 2024 by the three banks proposing to classify Ambani as a fraud under the Reserve Bank of India's Master Directions on Fraud, 2016. The notices were based solely on the forensic audit conducted by BDO LLP into the affairs of Reliance Communications Ltd, Reliance Telecom Ltd and Reliance Infratel Ltd for the period between 2013 and 2017. The audit was commissioned by a consortium of lenders led by State Bank of India after the Rcom group companies entered insolvency proceedings. Ambani challenged the notices on the ground that the forensic audit was conducted by an entity not qualified under law and signed by a person who was not a Chartered Accountant. He also pointed to a 4 year delay in invoking the fraud framework and argued that the audit itself did not conclude that he had committed fraud. The banks opposed the plea, contending that the audit was carried out under the 2016 RBI Master Directions and that later qualification requirements could not apply retrospectively. The court, however, disagreed with the banks, holding that even forensic audits ordered under RBI directions must comply with statutory audit requirements. Emphasising the nature of banking funds, the court observed that “monies with Banks is public money and therefore accounting and/or Audit standards are to be applied strictly as per relevant statutes”. "Though this issue may not be directly relevant or important to decide the interim relief, the question that begs an answer in this situation is the answerability of the banking system and concerned Banks and to whom. In my opinion in such a situation the Banks are answerable to the common man who reposes faith in the Banks by making investments and deposits.", it added. Further highlighting the possible impact of such classification, the court observed that it results in “ drastic and lead to disastrous consequences like being black listed, barred from new Bank loans / credit for years, criminal FIR filing, reputation damage, impacting fundamental rights to financial access and civil death. ”.Rejecting the banks' submission that court interference would derail the process, the court said such a plea could not stand “if the edifice on which it is based is itself palpably dubitable”.Case Title: Anil D Ambani v Indian Overseas Bank and OrsCase Number: INTERIM APPLICATION (L) NO.35925 OF 2025 IN SUIT (L) NO.35923 OF 2025For the Plaintiff / Applicants: Senior Advocate Gaurav Joshi, along with Advocates Ameet Naik, Piyush Raheja, Abhishekh Kale, Devashish Jagirdar and Ronit Doshi, instructed by Naik Naik & Company.; Senior Advocate Ashish Kamat, along with Advocates Ameet Naik, Abhishekh Kale, Devashish Jagirdar and Rohit Doshi, instructed by Naik Naik & Company; Senior Advocate Mayur Khandeparkar, along with Advocates Ameet Naik, Abhishekh Kale, Madhu Gadodia, Devashish Jagirdar and Ronit Doshi.For the Respondents: Senior Advocate Zal Andhyarujina, along with Advocates Akansha Agarwal, Babu Sivaprakasam, Nandita Bajpai, Rahat Kalptri and Vijay Srinivasan, instructed by Yogesh Pirtani; Senior Advocate Zarir Bharucha, along with Advocates Rishi Thakur and Dhwani Gala; Senior Advocate Kevic Setalvad, along with Advocates Jeehan Lalka, Nishit Dhruva, Niyati Merchant and Rajlaxmi Pawar, instructed by MDP Legal; Advocate Kunal Dwarkadas, along with Advocates Rahul Dwarkadas, Prachi Dhanani, Raushan Kumar and Aniket Kharote, instructed by RJD and Partners.Click Here To Read/Download Order

Bombay High Court Stays Fraud Proceedings Against Anil Ambani Over Prima Facie Defective Forensic Audit

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Bombay High Court Stays Fraud Proceedings Against Anil Ambani Over Prima Facie Defective Forensic Audit

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