Bank of Baroda, IDBI Bank, Indian Overseas Bank, and auditing firm BDO India LLP have approached a Division Bench of the Bombay High Court to challenge a single-judge order that stopped them from taking action against businessman Anil Ambani under the RBI’s 2024 Master Directions on fraud classification.
The matter was heard on Monday by a Division Bench headed by Chief Justice Shree Chandrashekhar and Justice Gautam Ankhad. The court will continue hearing arguments on January 14.
What is the matter?
Banks had declared Anil Ambani’s account as fraudulent. Anil Ambani argued that the forensic audit report used to classify his account as fraud was not prepared by a statutory auditor registered with the ICAI. The matter reached the court, where a single-judge bench of Justice Milind Jadhav ruled that, under the RBI’s 2024 Master Directions, any forensic audit report used to declare an account as fraudulent must be prepared by a statutory auditor registered with the Institute of Chartered Accountants of India (ICAI).
In Anil Ambani’s case, the judge noted that the forensic audit report relied upon by the banks was signed by a person who was not registered with ICAI. Based on this, the court took a preliminary view that the banks could not proceed against Ambani using such a report.
As a result, the single judge stayed all coercive action by Bank of Baroda, IDBI Bank, and Indian Overseas Bank against Anil Ambani. These actions were based on an October 2020 forensic audit into Reliance Communications and other group companies.
This stay order has now been challenged by the banks and BDO India LLP before the Division Bench.
Arguing for the banks, Solicitor General Tushar Mehta said that Ambani’s suit was filed too late and was based only on an RTI application filed by a third party seeking details about BDO’s registration.
Mehta argued that Ambani had been aware of the forensic audit report since 2021 and had never challenged its findings, which included allegations of fund siphoning, fake debtors, and misuse of bank loans. According to Mehta, Ambani’s only objection was that the auditor was not registered with ICAI, which he called unreasonable.
He also warned that the single-judge order could weaken the RBI’s fraud rules, which prevent people declared as fraud from raising funds or taking loans for five years. Mehta said the order could also lead to many similar court cases and create doubt over past fraud classifications.
Defending BDO, Mehta said the firm is an approved forensic auditor with SEBI and not an unqualified entity. He urged the Division Bench to stay the single-judge order and allow banks to proceed under the RBI rules.
More details will be released soon.
