MUMBAI: A division bench of the Bombay High Court on Monday set aside an order passed by a single-judge bench restraining three public sector banks from proceeding to classify the loan accounts of industrialist Anil Ambani’s companies as “fraud” based on a forensic audit report (FAR) from October 2020.
On December 24, 2025, a single-judge bench of justice Milind Jadhav had accepted Ambani’s argument that the report, prepared by external auditor BDO India LLP, could not be relied upon as it was not signed by a duly qualified chartered accountant, as required under the Reserve Bank of India’s (RBI’s) Master Directions.
However, a division bench of chief justice Shree Chandrashekhar and justice Gautam Ankhad on Monday stated that the single-bench order “suffers from procedural irregularity and illegality”. The division bench also declined Ambani’s request to stay the operation of the judgment for some time, observing that it will “amount to continuing the illegal order for the next four weeks and perpetuate the illegality”.
The case pertains to three banks—Bank of Baroda, IDBI Bank, and Indian Overseas Bank—that had issued show-cause notices to Ambani between January and December 2024, based on an FAR from October 2020. The notices proposed declaring the accounts of three of his companies—Reliance Communications Ltd (RCom), Reliance Telecom Limited (RTL) and Reliance Infratel Limited (RITL)—as fraudulent.
Ambani, the former non-executive director of RCom, had filed separate cases against the three banks, urging the high court to restrain them from acting on the notices. He argued that the signatory of BDO India, appointed by the State Bank of India, was not a chartered accountant registered with the Institute of Chartered Accountants of India. Hence, the firm was not authorised to carry out the audit in accordance with the RBI’s Revised Master Directions on Fraud, dated July 15, 2024, he contended. The banks had paid the firm ₹65 lakh in professional fees for the audit.
The banks argued that the 2016 RBI Master Directions, which were relevant at the time of the audit, did not require the external auditor to be a chartered accountant, and that the 2024 directions should not be applied retrospectively. They also argued that questioning the auditor’s qualifications was an “afterthought” on Ambani’s part after he had failed to resist the inevitable—his declaration as “fraud”.
In December, a single-judge bench of justice Milind Jadhav accepted Ambani’s argument and granted him interim relief. Allowing the banks to declare Ambani and the directors of his three companies as “fraud” would be “virtually drastic and lead to disastrous consequences,” including blacklisting, denial of further loans for years, and criminal FIRs, “impacting fundamental rights to financial access and civil death,” the bench had noted. It also disagreed with the banks, stating that forensic audits under RBI directions must meet statutory audit qualification standards.
However, the three banks, along with BDO India, challenged the order before a division bench, stating that the case raises a limited question of law regarding the interpretation of the RBI’s 2016 and 2024 Master Directions on fraud.
The single-judge bench’s order “unnecessarily expands the controversy” and makes findings on several matters that were not even argued, the banks argued. IDBI Bank’s plea, filed through advocate Rishi Thakur, stated that the court “erred in staying the show cause notice on the basis of the author or signatory of the audit report”.
The banks said that BDO India was supposed to identify fraudulent transactions and report them to the banks, which it did. “The forensic report is not required to make any determination about the fraud. The banks have to draw their independent conclusion. Simply because the report has disclaimers or qualifications, it cannot be discredited,” they argued.