Big relief to Anil Ambani, High Court stays order to declare loan account as fraud

Good News for Anil Ambani: Anil Ambani has been given a big relief by the Bombay High Court. The court has stayed the order of Canara Bank, in which the loan account of Anil Ambani's Reliance Communications Limited was declared 'fraud'. The company is already going through the bankruptcy process. 

The stay was imposed by the court because Ambani was not given a chance to be heard. A bench of Justices Revati Mohite Dere and Neela Gokle said that RBI should take some action against the banks because such incidents are happening again and again.

RBI was also allowed to be made a party

The High Court stayed Canara Bank's order of November 8, 2024 and allowed Ambani to make RBI a party in his petition. Ambani's loan account was declared fraudulent by Canara Bank on November 8. 

The bank alleged that a loan of Rs 1,050 crore given in 2017 was transferred to a group company, which helped in repaying the loans of related companies. The bank took this decision on the basis of RBI's master circular, which gives guidelines for such cases.

There was a stay on declaring the account as fraud.

Ambani's lawyer argued in the court that this order was conveyed by the bank on 25th December. Earlier on 20th December, in a similar case, the High Court had imposed a stay on declaring the account of independent director Manjari Kakar as fraud. 

He alleged that the bank had informed the RBI about this decision in September itself, the official order was issued later. Ambani's lawyer told that the bank had issued a show cause notice on 11th October, to which a reply was also given. 

But the bank did not provide the documents on the basis of which this decision was taken. He also said that the bank had given the forensic audit report, but it was based only on the opinion of a CA.

Banks should give borrowers an opportunity to be heard

Ambani's lawyer cited a Supreme Court ruling that said banks must give borrowers an opportunity to be heard before declaring an account as fraudulent. 

He also said the RBI had issued a circular asking banks to follow the Supreme Court order and formulate their own fraud declaration policies. Canara Bank had not yet formulated any such internal policy.

The judges raised the question whether the banks have no accountability? The court also said that such cases are coming to the court again and again, due to which public money is being wasted. Justice Mohite Dere said, 'Banks are repeating the same mistakes again and again.' 

The bank said that this order was passed on 6 September 2024 and it was informed to the RBI only after issuing it to Ambani. He also said that there was sufficient evidence to declare the account as fraud.

The court has sought a reply from the bank and has scheduled the next hearing of the case on March 6.