By Mahesh Nayak
State Bank of India (SBI) has classified the loan account of Reliance Communications (RCom) as “fraud”, and is initiating action to report Anil Dhirubhai Ambani, the company’s erstwhile director, to the Reserve Bank of India (RBI), the company said in a regulatory filing on Tuesday. This follows a forensic audit and a year-long exchange of show-cause notices (SCN) and responses.
SBI’s letter to the company stated that the bank’s Fraud Identification Committee (FIC) decided to classify RCom’s account as fraudulent. The bank is said to report the firm and Ambani, citing significant irregularities, including fund diversion and loan term violations.
The classification aligns with the RBI’s Master Directions on Frauds, which provide a framework for dealing with fraudulent activities in the banking sector. This alignment enables further regulatory and legal escalation, which may include civil and criminal prosecution.
RCom was admitted for insolvency proceedings in May 2018. As of March 2025, it has total debt of Rs 47,216 crore.
“Classifying a corporate account as fraudulent is a serious step under RBI norms, typically done after a forensic audit, show-cause notice, and committee reviews,” said Ashish Pyasi, Managing Partner at Aendri Legal.
While the company is shielded under Section 32A of the IBC, the promoter may face personal liability, including potential criminal proceedings, unless he seeks legal relief. Pyasi added that the bank gave RCom a chance to respond and present its position before classifying the account as fraudulent.
SBI’s FIC, in its meeting on June 13, 2025, identified a consistent pattern of financial misconduct, finding that RCom and its entities were engaged in fund diversion and opaque transactions. The audit revealed large-scale diversion of bank funds, channelled through related entities, temporarily parked in mutual funds or fixed deposits, and cycled via intra-day transactions to evade disclosure.
Despite written representations from RCom’s resolution professional and legal responses from Ambani’s counsel, SBI deemed the explanations insufficient to offset the findings of the forensic audit.
“We have taken cognizance of the responses (wherever received) to our SCN and after due examination it is concluded that sufficient reasons have not been provided by the respondent to explain the non-adherence to the agreed terms and conditions of the loan documents or the irregularities observed in the conduct of the account of Reliance Communication Limited to the satisfaction of the bank,” SBI stated in its letter.
Agarwal Law Associates, the legal counsel for Anil Ambani, in response to the SBI’s letter, said, “The order passed by SBI is not only ex-parte but also in blatant disregard of the principles of natural justice. Despite repeated written requests, the client (Ambani) was neither provided with the material forming the basis of the allegations nor granted a personal hearing.” It added, “while show cause notices were withdrawn against other non-executive and independent directors of RCom, Ambani—who held a similar non-executive role and had no involvement in the company’s day-to-day operations—has been selectively and unfairly targeted. This action stands in direct contravention of binding judicial precedents and RBI’s own guidelines.”
Interestingly, the Bombay High Court in February, suspended Canara Bank’s decision of November 2024 to classify Anil Ambani’s loan account linked to Reliance Communication’s as Fraud. Lawyers representing Ambani’s then had argued that Canara Bank’s fraud classification process lacked fairness and transparency. It highlighted several issues, including delayed communication of the classification order, premature disclosure to the RBI, and withholding of essential documents such as forensic audit reports.
This time too, the legal counsel for Ambani has highlighted similar concerns, including an incomplete copy of the forensic audit report and documents being provided that prevented the client (Ambani) from giving his detailed response to the allegations set out in the SCN and making submissions that there was no violation of the sanctioned facilities.
Meanwhile, RCom in its filing to stock exchanges on July 1, 2025, emphasised that the alleged irregularities predated the commencement of its Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016.
RCom clarified that a resolution plan approved by its committee of creditors (CoC) is currently awaiting ratification by the National Company Law Tribunal (NCLT) and that statutory protections under Sections 14 and 32A of the IBC shield the entity from liability or prosecution for past conduct.
RCom maintained that SBI’s fraud classification is not expected to impact the company’s ongoing insolvency resolution. However, it acknowledged that legal advice is being sought to determine the next course of action.
Nazneen Ichhaporia, Partner at ANB Legal, said, “Until the NCLT approves the resolution plan, Ambani has a temporary reprieve from immediate proceedings. However, once SBI and RBI submit the defaulter list, investigative agencies like the EOW may proceed with investigations. It’s likely that prosecutorial action will be deferred until the resolution plan is ratified. In the meantime, it would be prudent for Ambani to proactively explore legal remedies to safeguard his rights.”
“Ambani is actively pursuing all available remedies as legally advised, and remains committed to defending his position through appropriate judicial forums,” said the legal counsel.