Canara Bank drops 'fraud' label on Anil Ambani-linked RCom loan account

The case relates to a loan account linked with Ambani's firm Reliance Communications, which is undergoing insolvency proceedings

Canara Bank on Thursday informed the Bombay High Court that it has withdrawn its classification of a loan account linked to industrialist Anil Ambani as ‘fraudulent’.

 

Following this disclosure, a bench of Justices Revati Mohite Dere and Neela Gokhale disposed of Ambani’s petition challenging the fraud tag, stating that “nothing survives” in the matter.

 

The court further directed that this update be communicated to the Reserve Bank of India (RBI).

 

Case linked to Reliance Communications insolvency

 

The case relates to a loan associated with Ambani’s firm, Reliance Communications, which is undergoing insolvency proceedings. On 8 November 2024, Canara Bank had classified the account as fraudulent, citing multiple reasons including the diversion of ₹1,050 crore loan funds, disbursed in 2017, to a group company. These funds were allegedly used to settle liabilities owed to related parties.

 

 

The classification was made in accordance with the RBI’s master circular on fraudulent accounts, which outlines procedures and guidelines for such declarations.

 

SBI also flagged Reliance Communications account as fraudulent

 

Canara Bank’s move to withdraw the fraud tag comes shortly after Reliance Communications disclosed to the exchanges that the State Bank of India (SBI) had also labelled the firm’s loan account as fraudulent due to observed irregularities. 

 

In a letter to the company, SBI stated:

 

“We have taken cognisance of the responses (wherever received) to our show-cause notice and after due examination concluded that sufficient reasons have not been provided to explain the non-adherence to loan terms or account irregularities to the satisfaction of the bank.”

 

Ambani had challenged fraud tag citing lack of hearing

 

Earlier, in February this year, the Bombay High Court had stayed Canara Bank’s fraud classification while agreeing to hear Ambani’s plea. During the hearings, the court raised questions about whether the RBI intended to act against banks that fail to comply with its guidelines and the Supreme Court’s ruling, both of which mandate that borrowers must be granted a hearing before their accounts are classified as fraudulent.

 

Ambani’s legal challenge was based on this principle, arguing that no hearing was provided prior to the fraud declaration by Canara Bank.