Bombay High Court Lifts Stay on Fraud Classification of Anil Ambani’s Bank Accounts

Bombay High Court Lifts Stay on Fraud Classification of Anil Ambani’s Bank Accounts​

Division Bench Quashes Single Bench Order, Backs RBI Master Directions​

Mumbai, February 24: The Bombay High Court has lifted the interim stay that had restrained three public sector banks from classifying industrialist Anil Ambani and Reliance Communications Ltd as fraudulent borrowers under the Master Directions issued by the Reserve Bank of India.

A division bench comprising Chief Justice Shree Chandrashekhar and Justice Gautam Ankhad on Monday set aside the December 2025 order of a single bench, which had stayed action initiated by Indian Overseas Bank, IDBI Bank, and Bank of Baroda. The bench described the earlier order as perverse, illegal, and suffering from procedural irregularity and impropriety.

RBI Master Directions Not Subject to Routine Judicial Interference​

In its judgment made available on Tuesday, the court held that the RBI’s Master Directions are designed to safeguard public money and enable timely detection and mitigation of fraud in the banking system. It emphasized that these directions aim to identify fraudulent borrowers and unscrupulous individuals to ensure prompt action by lender banks.

The bench ruled that the Master Directions cannot be interpreted in a manner that prejudices lender banks or harms their interests. It further observed that not every violation of these directions is subject to judicial scrutiny.

Calling the issue one of public importance, the court stated that granting an interim stay in such matters was patently illegal, especially when ongoing criminal investigations could be directly affected.

No Irreparable Injury to Ambani: Court​

The division bench noted that no irreparable injury would be caused to Ambani if proceedings against him continued. It found no prima facie reason to grant an interim injunction in his favour and pointed out that criminal investigations were already underway.

The court also criticized the single bench order for contradictory findings and flawed assumptions of fact and law. According to the judgment, the primary objective of the RBI Master Directions was misunderstood, as they were issued in the interest of banking policy and financial stability.

Forensic Audit by BDO LLP Upheld​

The bench addressed objections raised against the forensic audit conducted by BDO India LLP. It clarified that banks are entitled to appoint external auditors, including forensic experts, or even internal teams for investigation.

The court held that the 2016 Master Directions do not mandate a forensic report before banks take a final decision. It also found that the single judge’s conclusion that BDO LLP’s report did not prima facie qualify as a forensic audit was perverse and liable to be set aside.

The judgment noted that BDO LLP is empanelled by the Indian Banks Association and the Securities and Exchange Board of India for conducting forensic audits.

Appeals Allowed, Request to Stay Order Rejected​

The division bench allowed appeals filed by the three public sector banks and BDO India LLP against the interim order. It agreed with the banks’ contention that the earlier stay undermined public confidence in the banking system.

Ambani’s counsel sought a stay on the division bench ruling to enable an approach to the Supreme Court, but the request was declined.

Earlier, the single bench had stayed all present and future action by Indian Overseas Bank, IDBI Bank, and Bank of Baroda, holding that the action was based on a legally flawed forensic audit and allegedly violated RBI guidelines.

The banks, however, argued in appeal that the forensic audit leading to the fraud classification was legally valid and based on serious findings of fund siphoning and misutilisation. Ambani had challenged the show cause notices issued by the banks, contending that BDO LLP was not qualified to conduct the forensic audit as its signatory was not a chartered accountant and that the firm was an accounting consultancy rather than an audit firm.

With the stay now lifted, the banks are free to proceed under the RBI Master Directions framework in classifying the accounts as fraudulent.