Bombay High Court stays fraud notices to Anil Ambani; questions banks’ compliance

The Bombay High Court on Wednesday (December 24, 2025) granted interim relief to Anil D. Ambani, restraining Bank of Baroda, IDBI Bank and Indian Overseas Bank from acting on show-cause notices and fraud classification orders issued against him on the basis of a forensic audit report prepared by BDO LLP (Binder Dijker Otte Limited Liability Partnership).

Justice Milind N. Jadhav held that the report, dated October 15, 2020, was “prima facie inconclusive and incomplete” and not signed by a qualified Chartered Accountant as mandated under law. 

“Once it is an admitted position that Defendant No. 3 is the sole author and signatory of the report and he is not a qualified Chartered Accountant though he may possess vast experience and hold certificates and citations from various Institutes around the world in the field forensic investigation, but he still does not qualify to be an Auditor within the requisite qualification under the relevant statutes to sign the FAR (Forensic Audit Report) in India,” the court observed in its Order. 

The judge noted that Reserve Bank of India’s (RBI) Master Directions, both 2016 and 2024, require external auditors to be qualified under relevant statutes, which include Sections 141 and 145 of the Companies Act, 2013. “Appointment of Auditor, whether internal or external even under the 2016 RBI Master Directions has to conform to the applicable statute. It will otherwise lead to a disastrous situation wherein there will be a clear dichotomy,” Justice Jadhav said. 

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The dispute stems from forensic audits ordered by a consortium of 20 banks led by State Bank of India into Reliance Communications and its group entities for the period 2013-2017. The lenders had an exposure of ₹31,580 crore to the companies. The forensic report alleged diversion of funds, including ₹12,692 crore to related parties and ₹6,265 crore to repay other bank loans. Mr. Ambani argued that the audit was flawed, delayed far beyond the six-month timeline prescribed under RBI norms, and violated principles of natural justice. 

Senior Advocate Gaurav Joshi, appearing for Mr. Ambani, argued that the forensic audit report (FAR) was prepared by an entity lacking statutory qualification. “Clause 4.1 read with Footnote 14 of the 2024 RBI Master Directions mandates Forensic Audit must be conducted by an auditor who is qualified as auditor under the relevant statutes. The FAR prepared by Defendant No.2 – BDO LLP is not an entity competent to conduct the External Audit,” he submitted. 

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Mr. Joshi pointed out that the signatory of the report was not a Chartered Accountant, and the firm was not registered with ICAI. “Sections 2(b), 2(e) and 6 of the Chartered Accountants Act, 1949 restrict audit practice to ICAI registered Chartered Accountants holding valid Certificate of Practice,” he said, adding that the report lacked a Unique Document Identification Number (UDIN) mandated by ICAI. 

Senior Advocate Ashish Kamat, also for Mr. Ambani, added that IDBI Bank’s show-cause notice was issued without providing supporting documents. Advocate Mayur Khandeparkar, appearing in the third suit, contended that Bank of Baroda’s fraud classification order was based solely on the same FAR. 

Senior Advocate Zal Andhyarujina, for Indian Overseas Bank, argued that the requirement of a Chartered Accountant was introduced only in 2024. “Under the 2016 RBI Master Directions no qualification is prescribed for the Auditor to be a CA. Footnote 14 in the 2024 RBI Master Directions will have to be considered as prospective,” he submitted. 

Senior Advocate Kevic Setalvad, for Bank of Baroda, said the suit was barred by limitation and amounted to “clever drafting.” Senior Advocate Zarir Bharucha, for IDBI Bank, maintained that the bank followed the 2016 directions and provided personal hearings. Advocate Kunal Dwarkadas, for BDO LLP, defended the firm’s competence, saying “Defendant No.3 is a seasoned forensic professional skill and competence do not necessarily reflect qualification of the professional as a CA only.” 

The court flagged serious procedural lapses, including the auditor’s prior engagement with lender banks before formal appointment, compromising independence. “A Forensic Auditor’s independence is extremely crucial for objectivity, association of Defendant No.2 with the Lender Banks as Consultant clearly creates a conflicting position,” Justice Jadhav noted. 

The court also criticised banks for ignoring RBI timelines and the delay beyond six months, “The Master Directions of RBI are not a mere paper tiger. Banks have behaved in a manner by throwing caution to the wind.” The judge stressed that banks are custodians of public money and must strictly follow RBI norms, “Money with Banks is public money. RBI Master Directions are required to be followed to the hilt so that money borrowed should not be lost.” 

Holding that Mr. Ambani had made out a strong prima facie case, the court stayed all actions taken under or in reliance upon the forensic report and the impugned notices. “Allowing the impugned action to proceed will lead to disastrous consequences in such cases where it leads to a certain civil death without trial,” the judge said. 

Senior advocates for the banks and BDO LLP sought a six-week stay, which the court declined. 

Published – December 24, 2025 03:03 pm IST