In a significant development, PSU lender Canara Bank has decided to unconditionally withdraw the fraud classification of businessman Anil Ambani in a matter related to Reliance Communications (RCOM). The bank informed the Bombay High Court’s division bench—comprising Justice Revati Mohite Dere and Justice Neela Gokhale—about its decision.
In November, Canara Bank had classified the RCOM account as fraudulent, prompting Ambani to challenge the move in the Bombay High Court.
Canara Bank is a lead member of a consortium of lenders to RCOM, which also includes SBI and Union Bank of India.
On February 8, 2024, the Bombay High Court stayed Canara Bank’s classification order, observing that the action appeared to violate the Reserve Bank of India’s master circular as well as a Supreme Court ruling mandating that borrowers must be granted a personal hearing before being declared fraudulent. Ambani’s counsel argued that the bank had failed to uphold the principles of natural justice, stating that he was neither given a personal hearing nor provided access to the critical documents used in the classification—contrary to the Supreme Court’s directive.
While granting the stay, the division bench—comprising Justice Dere and Justice Gokhale—also sought a response from the RBI, remarking that the central bank “needs to take some action against banks as this is happening repeatedly.”
With Canara Bank’s withdrawal, attention now turns to SBI, which has also declared the RCOM account fraudulent.
What legal experts say
According to legal experts, SBI’s classification of Reliance Communications’ loan account as “fraud” could face similar legal setbacks as Canara Bank’s.
Challenging SBI’s action, Ambani’s counsel wrote to the bank on July 2, contending that the order was issued ex parte, without giving Ambani an opportunity to be heard—amounting to a violation of both natural justice and Supreme Court rulings.
The counsel also stated that SBI ignored repeated requests for the documents underlying the fraud classification and failed to respond to concerns regarding the validity of the show-cause notice for nearly a year.
Given the similarities between the two cases, legal analysts anticipate that SBI’s action may soon meet the same “fait accompli” as Canara Bank’s withdrawal.
In legal terms, fait accompli refers to a thing that has already been done and is presumably irreversible.
