Bombay High Court stays bank action against Anil Ambani

The Bombay High Court on Wednesday stayed all coercive action by Bank of Baroda, IDBI Bank and Indian Overseas Bank against Anil Ambani, and founded on an October 2020 forensic audit report into Reliance Communications and group entities [Anil Ambani v. Indian Overseas Bank & Ors.].

Justice Milind Jadhav took a strong prima facie view that the audit report by audit firm BDO LLP cannot be relied upon because it was not signed by a duly qualified chartered accountant as required under the Reserve Bank of India’s 2024 Master Directions on fraud, which superseded the 2016 regime.

He opined that once the RBI’s 2024 Master Directions clarified that an external auditor must hold statutory qualifications under relevant laws, a forensic audit report signed by a non‑chartered accountant could not be treated as a valid foundation. It could not be used for punitive banking action, the Court said.

"If Banks themselves do not follow the Rule of Law and timelines as prescribed under the RBI Master Directions, which is prima facie observed in the present case and take action at the right time, it will affect the broader economy of the country," the judge observed.

He described the case as one where "the banks have woken up from their deep slumber, seeking to conduct a forensic audit for the period from Audit 2013 and 2017 in the year 2019, without adhering to any of the timelines prescribed under the 2016 RBI Master Directions."

Therefore, Justice Jadhav restrained Bank of Baroda, IDBI Bank and Indian Overseas Bank from proceeding further on show‑cause notices and fraud‑classification steps. 

A request by the banks and BDO LLP to stay operation of the order was expressly rejected. The judge noted that his prima facie findings left no room to keep the relief in abeyance.

"The Master Directions of RBI are not a mere paper tiger to enable the Banks to wake up from their deep slumber and initiate action according to their convenience," the judge observed.

Ambani, the former non‑executive director of Reliance Communications Ltd (RCOM), moved the Court challenging the show‑cause notices and fraud‑classification proceedings. These were initiated by a consortium of banks.​

He contended that BDO LLP was only an “accounting consultant firm”, not a firm of chartered accountants registered with the Institute of Chartered Accountants of India.

He further contended that the sole signatory of the report was admittedly not a chartered accountant holding a certificate of practice, rendering the entire exercise without jurisdiction under the 2024 RBI Master Directions and the Companies Act, 2013.​

The suit also alleged violations of natural justice, pointing out that the erstwhile management was never allowed to participate in the forensic exercise.

Ambani argued that the 2024 Master Directions, which superseded the 2016 regime, explicitly tied the eligibility of external/forensic auditors to qualifications prescribed in relevant statutes.

This means banks could not rely on a report authored and signed by an unqualified person to trigger the draconian consequences of fraud labelling, it was argued,.

The banks opposed interim relief on grounds of limitation, waiver and estoppel.

They stressed that RCOM’s account had been classified as fraud as far back as in December 2020 and that Ambani had participated in multiple rounds of correspondence, personal hearings and writ proceedings without challenging the competence of BDO LLP.​

They maintained that under the 2016 Master Directions, there was no requirement that an external or forensic auditor be a chartered accountant.

They further argued that any contrary reading of the provisions would disrupt completed and ongoing fraud actions across the banking system.​

The Court opined that once RBI consciously tethered external audits for fraud purposes to statutory audit qualifications in 2024, banks could not continue to rely on draconian measures on a report prepared and signed by an entity and individual who were not even members of ICAI.

Senior advocates Gaurav Joshi, Ashish Kamat and Mayur Khandeparker with advocates Ameet Naik, Madhu Gadodia, Piyush Raheja, Abhishekh Kale, Devashish Jagirdar and Ronit Doshi briefed by Naik Naik & Company appeared for Anil Ambani.

Senior advocates Zal Andhyarujina, Zarir Bharucha and Kevic Setalvad with advocates Akansha Agarwal, Babu Sivaprakasam, Nandita Bajpai, Rahat Kalptri, Vijay Srinivasan, Yogesh Pirtani, Rishi Thakur, Dhwani Gala, Jeehan Lalka, Nishit Dhruva, Niyati Merchant and Rajlaxmi Pawar briefed by MDP Legal represented the banks.

Advocates Kunal Dwarkadas, Rahul Dwarkadas, Prachi Dhanani, Raushan Kumar and Aniket Kharote briefed by RJD and Partners appeared for the forensic auditor.

[Read Judgment]