Mumbai: The Bombay High Court has upheld the State Bank of India’s decision to classify the loan accounts of industrialist Anil Ambani and Reliance Communications as “fraud,” ruling that the bank’s action was legally sound and well-reasoned, according to an order copy made available by the court on Tuesday.  

A division bench of Justices Revati Mohite Dere and Neela Gokhale, on October 3, dismissed Ambani’s petition challenging the SBI order. The detailed judgment, made available on Tuesday, stated that the June 13 order by the public sector lender carried no legal infirmities and therefore did not warrant interference.

Ambani had argued that the order was invalid as he was neither granted a personal hearing nor provided with all relevant documents.

The court, however, rejected this contention, observing that under the Reserve Bank of India’s Master Directions—which govern such proceedings—the right given to borrowers is limited to submitting a written representation, and does not extend to a personal hearing.

The high court stated that Ambani’s plea lacked merit and affirmed that SBI’s classification of the accounts as fraud stood valid in law.

According to the court, the bank only issued the order designating the account as fraudulent when Ambani failed to respond to the show-cause notice that the SBI had sent him last year.

Earlier, on June 13 this year, SBI tagged the loan accounts of Reliance Communications (RCom) and its promoter, Anil Ambani, as fraudulent.

The bank cited diversion of funds, breach of covenants and related-party transactions as the reasons behind its decision, approaching the Central Bureau of Investigation (CBI) for action.

Anil Ambani had challenged the decision because he was only a non-executive director and had been selectively singled out. He also argued that an adequate opportunity to present his defence was not provided by the bank

Another public sector lender--Bank of Baroda had declared that the loan accounts of Reliance Communications Ltd (RCom) and its erstwhile director Anil Ambani had been categorised as “fraud”

This classification pertained to loans taken before RCom entered the corporate insolvency resolution process (CIRP), the bank had said in an exchange filing. (IANS)