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The Supreme Court has declined to interfere with a Bombay High Court ruling that lifted the stay on fraud classification proceedings against Anil Ambani and Reliance Communications. The case stems from a forensic audit that flagged alleged diversion of funds worth around INR 30,000 crore. While dismissing the appeals, the apex court allowed Ambani to challenge the show-cause notices before the High Court and asked for an expedited hearing. The decision follows earlier withdrawal of interim relief and puts the focus back on detailed examination of the matter at the High Court level.
The Supreme Court has refused to intervene in a Bombay High Court order that allowed banks to continue fraud classification proceedings against industrialist Anil Ambani and companies linked to him, including Reliance Communications. This clears the way for lender banks to move ahead with their internal processes under regulatory guidelines. Advertisement
The appeals filed by Ambani and related entities were dismissed, with the court upholding the division bench ruling of the High Court that had lifted an earlier stay. At the same time, the apex court permitted Ambani to raise all his objections to the show-cause notices before a single-judge bench of the High Court and directed that the matter be heard and decided within a reasonable time frame.
The case relates to action initiated by a consortium of banks, led by public sector lenders, to classify certain loan accounts as fraud. These proceedings are based on findings from a forensic audit, which reportedly identified diversion and possible siphoning of funds amounting to nearly INR 30,000 crore. The classification of an account as fraud has serious consequences, including restrictions on future borrowing and access to financial markets.
Ambani had earlier obtained interim relief from a single-judge bench of the High Court, which had restrained banks from taking coercive steps based on the audit findings. However, that protection was set aside by a division bench in the past few months, allowing banks to proceed with the classification process. This led to the current appeal before the Supreme Court.
During the hearing, Ambani's legal representatives argued that such a classification must follow due process and be based on a valid and properly conducted forensic audit. They pointed out that the audit report relied upon by the banks had shortcomings and should not be the sole basis for declaring the accounts as fraud. It was also submitted that the consequences of such a declaration are severe and impact business operations and reputation.
Banks, on the other hand, maintained that the forensic audit was conducted by a recognised firm and in line with regulatory norms. They argued that the findings clearly pointed to financial irregularities and that lenders have the authority to take commercial decisions to safeguard public funds. The banks also stated that borrowers had been given adequate opportunity to respond to the show-cause notices.
The Supreme Court observed that the matter involves detailed examination of facts and technical issues, which are better addressed by the High Court. It clarified that the High Court should decide the case independently and not be influenced by any earlier observations made while lifting the interim stay.
This dispute forms part of a larger set of legal and financial challenges faced by Reliance Communications, which had earlier been classified as a non-performing asset. Insolvency proceedings were initiated under the Insolvency and Bankruptcy Code, and lenders have been pursuing recovery through multiple legal routes. The fraud classification process is separate but linked, as it deals with the nature of the default and conduct of the borrower.
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