Mumbai, Dec 24 (PTI) The Bombay High Court on Wednesday stayed all present and future actions by three banks—Indian Overseas Bank, IDBI, and Bank of Baroda—seeking to declare the accounts of Anil Ambani and Reliance Communications Ltd as “fraud,” noting that the banks had violated the Reserve Bank of India’s (RBI) Master Directions.
Justice Milind Jadhav observed that the action was based on a forensic audit report by external auditor BDO LLP, which could not be relied upon as it was not signed by a duly qualified chartered accountant (CA), a mandatory requirement under the RBI’s 2024 Master Directions.
The court warned that without interim relief, Ambani and Reliance Communications would face “grave and irreparable harm,” including blacklisting, denial of loans, criminal FIRs, and reputational damage.
“Principles of natural justice are based on the maxim ‘justice should not only be done but should manifestly be seen to be done,’” the bench said, adding that banks cannot issue show-cause notices relying on an unsigned or improperly qualified audit report.
The court also criticized the banks for delaying the action and described it as a “classic case where the banks have woken up from their deep slumber,” noting that the forensic audit covered 2013-2017 but was conducted only in 2019.
Ambani had challenged the notices, arguing that BDO LLP, being a consulting firm and not a statutory audit firm, lacked the CA-qualified signatory required to conduct a forensic audit under RBI rules. The banks contended the report complied with the 2016 RBI Master Directions, which, they claimed, did not require a CA.
The HC, however, reaffirmed that RBI norms are binding and eligibility for appointment as a company auditor requires CA qualification. Additionally, BDO LLP’s prior consultancy work with the banks created a conflict of interest, undermining its independence.
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