Mumbai, December 24, 2025: The Bombay High Court on Wednesday stayed all present and future actions by three public sector banks seeking to declare the accounts of industrialist Anil Ambani and Reliance Communications Ltd as “fraud,” holding that the process violated mandatory norms laid down by the Reserve Bank of India.
Justice Milind Jadhav ruled that the lenders had relied on a forensic audit report prepared by external auditor BDO LLP, which could not be acted upon as it was not signed by a duly qualified chartered accountant, a requirement under the RBI’s 2024 Master Directions on fraud. The court observed that granting interim relief was necessary, noting that the absence of a stay would cause “grave and irreparable harm” to Ambani and his company.
Emphasising adherence to principles of natural justice, the High Court said justice must not only be done but must also be seen to be done. It held that banks cannot issue show-cause notices based on forensic audit reports prepared by external auditors unless the engagement strictly complies with RBI norms. The court underlined that the RBI’s Master Directions operate within a binding statutory framework and are mandatory in nature.
The order noted that declaring the accounts as fraud would have far-reaching consequences, including blacklisting, denial of access to fresh credit for several years, initiation of criminal proceedings, severe reputational damage and an effective exclusion from the financial system, which the court described as a form of “civil death.”
The High Court also came down heavily on the banks for the delay in initiating action, terming it a classic case of lenders waking up from a “deep slumber.” It pointed out that the forensic audit was initiated in 2019 for transactions dating back to 2013–2017, raising serious concerns over procedural fairness and timeliness.
Ambani had approached the court challenging show-cause notices issued by Indian Overseas Bank, IDBI Bank and Bank of Baroda, seeking to declare his and Reliance Communications’ accounts as fraud. He sought protection against coercive action, arguing that BDO LLP was not qualified to conduct the forensic audit as its signatory was not a chartered accountant. He also contended that the firm functioned as an accounting consultant rather than an audit firm.
The banks defended their move by arguing that the audit was conducted under the 2016 RBI Master Directions, which did not explicitly mandate that an external auditor be a chartered accountant. They further claimed that Ambani had raised objections to the auditor’s qualifications at a belated stage and with mala fide intent.
Rejecting these submissions, the court held that under the RBI’s Master Directions, only a chartered accountant is eligible to be appointed as an auditor of a company. It also noted that BDO LLP had earlier acted as a consultant for the lender banks, creating a conflict of interest that undermined its independence and credibility as an auditor.
