The Delhi High Court on Friday set aside Union Bank of India’s decision to declare as fraudulent the bank account of a company owned by industrialist Anil Ambani’s son, Jai Anmol Ambani, holding that the bank acted without serving a valid show cause notice.
Justice Jyoti Singh held that the declaration was vitiated as no show cause notice was ever served on Anmol Ambani before the account was classified as fraud. The court noted that the notice relied upon by the bank had been sent to an address that the company had vacated in 2020.
“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.
However, the high court clarified that its order would not prevent Union Bank of India from initiating fresh proceedings in accordance with law. It permitted the bank to issue a fresh show cause notice to Anmol Ambani, furnish all relevant documents relied upon, and thereafter pass a fresh order after considering his response.
The court was hearing a petition filed by Anmol Ambani challenging the bank’s decision taken in October to declare the account fraudulent without issuing any show cause notice or granting him an opportunity of hearing, in violation of the principles of natural justice.
Relying on a Supreme Court ruling, the petitioner argued that borrowers must be given prior notice and an opportunity to respond before an account is classified as fraud. Senior Advocate Rajiv Nayar, appearing for Anmol Ambani, pointed out that Union Bank’s own affidavit showed that the show cause notice was sent to an address the company had vacated as far back as September 2020.
Taking note of these submissions, the court observed that this clearly meant no show cause notice was served on the petitioner before the fraud classification.
The case has its backdrop in a CBI probe against Jai Anmol Ambani and Reliance Home Finance Ltd (RHFL) in connection with alleged cheating of Union Bank of India, which reportedly caused a loss of nearly Rs 228 crore to the public sector bank. The CBI acted on a complaint filed by the bank, formerly Andhra Bank, against RHFL, Jai Anmol Ambani, and another director, Ravindra Sharad Sudhakar.
According to the complaint, RHFL had availed credit limits of around Rs 450 crore from the bank’s SCF branch in Mumbai for business purposes. The account was classified as a non-performing asset on September 30, 2019, after the company allegedly failed to service its loan instalments.
