RBI fraud circular: Banks, auditor move Bombay High Court to lift stay order protecting Anil Ambani

The Bank of Baroda, IDBI Bank, Indian Overseas Bank and auditor BDO India LLP have approached a Division Bench of the Bombay High Court to challenge a single‑judge order that restrained them from taking any action against businessman Anil Ambani under the Reserve Bank of India’s 2024 Master Directions on fraud classification [Bank of Baroda & Ors v. Anil Ambani & Ors.].

The Division Bench of Chief Justice Shree Chandrashekhar and Justice Gautam Ankhad heard the matter on Monday and will continue hearing arguments on January 14.

A single judge Bench comprising Justice Milind Jadhav had earlier held that under the 2024 Master Directions, a forensic audit report relied upon by banks to classify 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 observed that the forensic report was signed by a person not registered with ICAI. The single judge took a prima facie view that the banks could not proceed against Ambani based on such a document.

He, therefore, stayed all coercive action by Bank of Baroda, IDBI Bank, and Indian Overseas Bank against Anil Ambani, which were founded on such an October 2020 forensic audit report into Reliance Communications and group entities.

This stay order has now been challenged by the banks and the auditor concerned, namely BDO India LLP, before the Division Bench.

Appearing for the banks, Solicitor General Tushar Mehta argued that the suit filed by Ambani was “hopelessly time‑barred” and rested entirely on an RTI application filed by a third person seeking BDO’s registration details.

“The entire purported cause of action is premised on this RTI application and the Institute’s response,” he said.

Mehta contended that Ambani was aware of the 2021 forensic report and had never disputed its findings on fund siphoning, fictitious debtors and misuse of bank loans.

“Only ground is he (auditor) is not a member of the Chartered Accountants Institute. It is as simple and as absurd as that,” he submitted.

Mehta said it effectively nullified the RBI’s Master Directions that debar persons classified as fraud from raising funds or seeking credit for five years. He warned that the stay order could open the floodgates for litigation and cast a doubt on past fraud classifications.

“This BDO is an approved forensic auditor by SEBI. It is not just a nobody picked from the street,” he added, while urging the Division Bench to stay the single-judge's interim order under challenge.