THE BOMBAY HIGH COURT REJECTS AMBANI’S CHALLENGE TOSBI’S FRAUD CLASSIFICATION

Prachi Barot

Renaissance University Indore

Editor : Harsh Kashyap

The High court of Bombay has upheld Industrialist Anil Ambani’s challenge to the fraud classification by the State Bank of India ( SBI )’s order dated June 13, 2025, classifying the loan account of the Reliance Communications Ltd. ( RCom) and Mr. Anil Ambani's as fraud, as per the RBI’s fraud risk management rules. The challenge  was dismissed by the Bombay High court on the ground of lacking merit in October, 2025, and as no procedural flaws were identified. The case highlights the wide ranging issues of corporate governance, accountability and the banking regulatory system. 

BACKGROUND 

After a forensic audit by the BDO India LLP, which states fund diversions and financial misconduct. This led to SBI’s classification  of RCom’s loan account as fraud with a principal outstanding amount of Rs. 2,227.64 crore. 

The BDO India LLP detected large - scale irregularities claiming that the funds sanctioned for the specific purposes were diverted to related parties, without the knowledge of the bank, and were misused by the Reliance Communications Ltd by manipulating the accounts of the company.  

Based on the forensic audit SBI’s served a show - cause notice to RCom Ltd., and

Industrialist Anil Ambani on December 20, 2024 requesting a written explanation. Mr. Anil Ambani asserted the show cause notice as invalid and requested the full audit report. SBI adhered to the request and provided the forensic audit report with relevant annexures, thereby providing further time to respond. 

When no substantive reply was received to the show - cause notice within the updated time allotted , on June 13, 2025, SBI’s fraud identification committee passed a reason declaring the account as “fraud” thereby notifying Anil Ambani, who is the non executive director of RCom Ltd. to RBI and filing a complaint with the Central Bureau of Investigation (CBI). 

HIGH COURT RULING  

In the ruling the Bombay High Court stated that the State Bank of India violated the principles of natural justice by not giving him an opportunity for  personal hearing to RCom Ltd. and Annil Ambani account as fraud.  

Ambani’s petition was dismissed on the grounds that the bank has followed both RBI’s 2024 Master Direction on Fraud Classification and its own internal policies, by a divisional bench composed of Justices Revati Mohite Dere and Neela Gokhale. 

Key Findings by the Court:-  

1.     Sufficient Opportunities Provided for Representation :-  

The bench observed that adequate time was provided by the SBI to submit a written response after providing the forensic audit report and relevant annexures and number of written notices to Ambani. This fulfilled the condition of providing a requirement of right to be heard.  

2.     No Statutory Right to Personal Hearing :-  

According to the fundamentals of natural justice, right to be heard, the  principle ‘ Audi Alteram Partem’ which means listen to the other side, doesn’t directly dictate an oral or personal hearing, and providing a reasonable opportunity to respond is writing is sufficient.  

3.     Liability of the Promoter :-  

According to the annual reports of RCom Ltd. Ambani was identified as the ‘ promoter’ and  ‘ person in control’, the bench determined  that, even in his role of non - executive director  he could be held accountable for the company's  fraudulent activities.  

LEGAL AND REGULATORY IMPLICATIONS  

1.     Natural Justice Principle :-  

The judgement enforces that banks must provide a reasonable opportunity to respond to borrowers before classifying the accounts as ‘fraud’ emphasising that written representations are valid as per the principle of ‘ audi alteram partem’ and an oral hearing is not always a mandatory requirement, aligning with Supreme Court’s SBI vs Rajesh Agrawal case ( 2023 ). 

2.     Legitimacy of the RBI’s Master Directions :- 

The decision authenticated the legitimacy of the Reserve Bank of India’s ( RBI ) 2024 Master Directions on Fraud Risk Management as a fair and legally robust framework. The court adhered that these directions sufficiently ensure procedural fairness without statutory mandating oral hearings. 

3.     Promoter and Director Accountability :-  

The decision to flag Ambani as fraudulent the court emphasises that rather than an executive position a person’s control over the company will determine liability. This may prop against those who try to evade responsibility by remaining in non - executive roles. 

AMBANI’S POSITION 

Anil Ambani claimed that the fraudulent charges were a result of  “selective targeting”, further arguing that he was a non - executive director at the time of alleged financial misconduct which limits his involvement in daily operations.  

The Reliance Communications Ltd. is already undergoing insolvency regulations as per the Insolvency and Bankruptcy Code ( IBC ) and this fraud classification presents notable financial, business and reputational risks, eroding investor and creditor confidence, also affecting the future business prospects.  

RISKS AND CHALLENGES  

1.     CBI Investigation :-  

SBI has lodged an FIR with Central Bureau of Investigation and if it investigates, criminal offences for fraud, conspiracy, or breach of trust will be attracted giving a new angle of legal risk for RCom Ltd. directors and Anil Ambani.  

2.     Potential Appeal in the Supreme Court :-  

Ambani possesses the legal option to file an appeal with the Supreme Court of India which would challenge the interpretation of the High Court related to procedural fairness, arguing that the oral and personal hearing is a mandatory right.  

3.     Setting Legal Precedent :-  

The judgement will set a precedent for future banking fraud cases particularly concerning the liability of non - executive directors and also clarifying the procedural requirements for banks and rules regarding mandatory oral hearing.

CONCLUSION 

The decision of the High Court of Bombay certifies that the State Bank of India ( SBI ) adhered to the norms of required by the Reserve Bank of India’s ( RBI ) 2024 Master Directions even without granting an oral personal hearing opportunity to Ambani, supporting flexible yet principled application of natural justice. The court adjudicated that SBI provides reasonable opportunity to respond in writing and banks don’t generally have to provide in person oral hearing for fraud classification.  

The case brings questions about promoter’s liability and corporate responsibility even if they are not involved in the day to day operations of the company. Whether this case will bring judicial supervision or merely serve as a warning to businesses remains to be seen. 

REFERENCES :- 

1.     Supreme Court issues notice to Centre, CBI, ED & Anil Ambani on plea for probe into RCom bank fraud, Bar & Bench (Nov. 18, 2025), https://www.barandbench.com/news/litigation/supreme-court-issues-notice-to-centrecbi-ed-anil-ambani-on-plea-for-probe-into-rcom-bank-fraud 

2.     Anil Ambani denies fraud charges after CBI raid, calls SBI move ‘selective targeting’, Business Today (Aug. 23, 2025), https://www.businesstoday.in/india/story/anil-ambani-denies-fraud-charges-after-cbi-r aid-calls-sbi-move-selective-targeting-490815-2025-08-23

3.     Bombay HC dismisses Anil Ambani’s petition against SBI’s fraud classification to RCom loan account, The Economic Times (Oct. 10, 2025), https://economictimes.indiatimes.com/news/india/bombay-hc-dismisses-anil-ambanispetition-against-sbis-fraud-classification-to-rcom-loan-account/articleshow/12429099

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4.     Bom HC upholds SBI order declaring accounts of Anil Ambani and RCom as fraud, SCC Online Blog (Oct. 10, 2025), https://www.scconline.com/blog/post/2025/10/10/bom-hc-upholds-sbi-order-declaring

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