Major Relief For Anil Ambani As Canara Bank Withdraws Order Classifying Reliance Comm Loan Account As 'Fraud'

In a relief for industrialist Anil Ambani, the Canara Bank recently informed the Bombay High Court that it has 'withdrawn' its order classifying his loan account, related to Reliance Communications, as "fraudulent account."

A division bench of Justices Revati Mohite-Dere and Dr Neela Gokhale accepted the statement and disposed of the petition filed by Ambani challenging the validity of the said order. 

In its order passed on July 10, the judges recorded, "Mentioned out of turn at 2:00 p.m. The counsel for the Canara Bank, on instructions, states that the bank has withdrawn the order declaring the Petitioner's Company account as 'Fraud'. In view of the statement made by the counsel for the bank, nothing survives for further consideration in the Petition. The Petition stands disposed of."

Notably, the bench had on February 7, stayed the said order after noting that the action of the Bank was in contravention of the 'Master Circular' issued by the Reserve Bank of India (RBI) on fraud accounts and also in breach of the ruling of the Supreme Court. It may be noted that both the Supreme Court and also the Master Circular has mandated that the borrowers must be given a hearing before the bank proceeds to classify them as fraud accounts.

According to Ambani's petition, the Canara Bank on November 8, 2024 classified the loan accounts of Reliance Communications and its subsidiaries as 'fraudulent' citing misappropriation of a Rs 1,050 crore loan extended in 2017.

Senior Advocate Gaurav Joshi, who appeared for Ambani in the February hearing, had pointed out that though the bank passed the classification order on November 8 but it was communicated to Ambani only in December, which was again after 25 days of the HC bench staying a similar fraud classification order against an independent director of the Reliance Communications.

The senior advocate had further pointed out that his client was served with a show cause notice on October 2023 to which a preliminary response was filed but despite repeated requests, the bank did not furnish the documents including a 'forensic report' which were purportedly relied by the bank authorities while classifying his loan account as fraudulent. He also told the bench that the Canara Bank has still not come up with its own internal policy for classifying loan accounts as fraudulent, as required under RBI guidelines.

On the other hand, the Canara Bank while rebutting the allegations, had told the judges that it had passed the order classifying the loan account as fraudulent on September 6, 2024 and the same was communicated to the RBI only after the order was issued.

However, the bench was unimpressed by the bank's submissions and had ordered it to file a response to Ambani's plea and also ordered addition of RBI as a respondent to the petition.

But now, the bank has withdrawn the order in question and therefore, the bench has disposed of the petition itself.

Appearance:

Senior Advocate Gaurav Joshi along with Advocates DJ Kakalia, Bhavana Jaipuria, Paresh Patkar, Shilpa Joshi and Kartik Hede instructed by Mulla & Mulla & Craigie Blunt & Caroe appeared for Ambani.

Advocates Nishit Dhruva and Niyati Merchant instructed by MDP Legal represented Canara Bank.

Case Title: Anil D Ambani vs Canara Bank [Writ Petition (Lodging) 3098 of 2025]