Delhi HC quashes fraud tag on bank account linked to Jai Anmol Ambani

The Delhi High Court on Friday overturned Union Bank of India’s decision to label as fraudulent the bank account of a company linked to Jai Anmol Ambani, son of industrialist Anil Ambani, holding that the action was taken in breach of procedural safeguards.

 

Justice Jyoti Singh, allowing Ambani’s petition, found that the bank had failed to issue any valid show-cause notice or grant him a hearing before making the fraud classification, which goes against the principles of natural justice.

 

Ambani had relied on the Supreme Court’s ruling in State Bank of India vs Rajesh Agarwal, which mandates prior notice and an opportunity to respond before a borrower’s account is declared fraudulent.

 

Appearing for Ambani, senior advocate Rajiv Nayar pointed out that Union Bank’s own affidavit disclosed that the show-cause notice was sent to premises vacated by the company in September 2020.

 

The court held that this could not amount to proper service and concluded that no notice had, in fact, been served before the adverse decision was taken.

 

“This Court is of the view that indeed a show-cause notice was never served before making the declaration as fraud. Accordingly, in light of the judgment … the impugned classification and declaration are quashed,” the court said.

 

At the same time, the court clarified that its order would not prevent the bank from restarting the process in accordance with law. Justice Singh directed that Union Bank may issue a fresh show-cause notice, supply all relevant documents and material to Ambani, consider his reply, and then pass a reasoned order.

 

The case arises against the backdrop of criminal proceedings initiated by the Central Bureau of Investigation against companies of the Anil Ambani group over alleged fraud of about ₹14,853 crore. In relation to Jai Anmol Ambani, the CBI has alleged that Union Bank suffered a loss of around ₹228 crore.

 

According to the Bureau, Reliance Home Finance Limited (RHFL), where Jai Anmol Ambani served as a director, availed large loans but defaulted on repayment. A forensic audit is stated to have found diversion and misuse of loan funds, leading to the account being classified as a non-performing asset. Union Bank subsequently declared the account fraudulent and approached the CBI, alleging offences including criminal conspiracy and cheating.