Fraud Loan Accounts Row: Bombay High Court Grants Interim Relief To Anil Ambani, Stays Coercive Action By Bank Of Baroda

In a temporary relief, the Bombay High Court on Wednesday restrained the Bank of Baroda from taking any coercive action in furtherance of its September 4 order classifying the loan accounts of industrialist Anil Ambani's Reliance Communications as 'fraud.'

A division bench of Justice Riyaz Chagla and Farhan Dubash asked the Bank not to take any action till further hearing in the matter, which is slated to take place on September 24.

"As the Bank has sought time to file an affidavit in reply to the present petition, the counsel for the Bank, states on instruction that it will not act in furtherance of the impugned notice till Wednesday (September 24). The Bank to file its reply by September 23 till then there will not be any coercive action," the bench recorded in the order. 

This comes after Ambani petitioned the High Court challenging the order of the Bank by which his firm's loan accounts were categorised as 'fraud' citing mis-utilisation of borrowed funds, diversion of loan proceeds, unauthorised transactions, and improper use of inter-corporate deposits.

Appearing for Ambani, senior advocate Navroz Seervai informed the bench that the BDO report in the instant matter was commissioned by State Bank of India (SBI) on its own behalf as a lead bank of a consortium of banks. But admittedly and undisputedly, Seervai argued, Bank of Baroda was not a part of the consortium of the banks which granted loans and thus the entire proceedings are illegal.

However, the judges opined that the Bank needs to be given a chance to file their say in the matter through an affidavit. 

At this, Seervai urged for an interim relief for his client but the counsel appearing for the Bank informed the judges that they have already informed of their decision to Reserve Bank of India (RBI), in terms of the Master Circular— which lays down procedure for categorising a loan account as fraud.

"The petitioner apprehends of some action from our end but it must be noted that already SBI has approached the Central Bureau of Investigation (CBI) after categorising his account as fraud. So the petitioner is already having a tag of a fraud. They apprehend that we will go to the Central Bureau of Investigation (CBI) but already SBI has gone to the CBI and the agency has written to my client (Bank of Baroda) seeking some details. I cannot be stopped from giving details to the CBI," the Bank contended.  

However, Justice Chagla asked the counsel not to take any action in furtherance to the impugned order of September 4, till Tuesday.