HC allows Banks to resume RBI Fraud action against Anil Ambani, calls prior order Legally Unsustainable

A Division Bench of the Bombay High Court quashed an interim order that had restrained three banks and audit firm BDO India LLP from acting against Anil Ambani under the RBI’s 2024 fraud classification framework. The Bench termed the earlier ruling “perverse” and declined to stay its own judgment, clearing the path for lenders to proceed under the Reserve Bank’s Master Directions, a move with immediate implications for fraud tagging actions across the banking sector.

The appeal arose from a December 2025 order by a single judge that halted coercive steps by Bank of Baroda, IDBI Bankand Indian Overseas Bank based on an October 2020 forensic audit into Reliance Communications and related entities. The stay rested on a prima facie view that the audit report could not underpin a fraud classification because its signatory was allegedly not registered with the Institute of Chartered Accountants of India, as required under the 2024 Master Directions.

On appeal, the banks argued that the challenge was time-barred, hinged solely on RTI sourced information about the auditor’s registration, and did not dispute the audit’s substantive findings regarding fund diversion and misuse of loans. They warned that the interim relief effectively diluted the RBI framework, which bars entities classified as fraud from accessing credit for five years, and could unsettle prior classifications. The audit firm emphasized its status as a SEBI approved forensic auditor.

The Division Bench led by Chief Justice Shree Chandrashekhar and Justice Gautam Ankhad found the single judge ruling legally unsustainable and set it aside. Rejecting Ambani’s plea for a four-week stay, the Court observed, “to sustain the operation of this order, shall amount to continuing the illegal order for the next 4 weeks and perpetuating the illegality.”

Holding that the impugned order suffered from “decisional irregularity and illegality,” the Bench refused to extend its life even temporarily, thereby restoring the banks’ liberty to proceed in accordance with the RBI’s 2024 Master Directions.

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