The Supreme Court of India on Thursday cleared the way for public sector banks to continue proceedings aimed at classifying the bank accounts of industrialist Anil Ambani and Reliance Communications Ltd (RCom) as “fraud.”
A three-judge bench, led by Chief Justice Surya Kant and comprising Justices Joymalya Bagchi and Vipul M. Pancholi, dismissed Ambani’s challenge against a Bombay High Court decision that had lifted a stay on these investigative actions. However, the apex court granted Ambani the liberty to pursue his grievances against the banks’ show-cause notices before a single judge of the High Court, requesting an expedited resolution of the matter.
The legal battle stems from show-cause notices issued by three major lenders—Indian Overseas Bank, IDBI Bank, and Bank of Baroda. These notices sought to declare the accounts associated with Anil Ambani and Reliance Communications as “fraud accounts” following a forensic audit.
In December 2025, a single judge bench of the Bombay High Court had initially passed an interim order staying all present and future actions by these banks. The single judge had observed that the banks’ actions were based on a “legally flawed” forensic audit and appeared to violate mandatory guidelines set by the Reserve Bank of India (RBI).
This stay was subsequently challenged by the three public sector banks and the auditor firm BDO India LLP. On February 23, a division bench of the Bombay High Court quashed the single judge’s interim stay, effectively allowing the banks to proceed with the fraud classification process.
Ambani filed three separate pleas before the Supreme Court challenging this division bench order. He sought to reinstate the stay, arguing against the validity of the proceedings initiated by the financial institutions.
While dismissing the pleas to stay the proceedings, the Supreme Court bench directed the focus back to the original challenge against the show-cause notices. The apex court permitted Ambani to continue his litigation before the High Court’s single judge bench.
“The bench requested the single judge bench to expeditiously decide Ambani’s plea against the show-cause notices issued by three banks,” the order noted, ensuring that the underlying merits of the fraud classification dispute are addressed without further delay.
This development marks a significant step for the lending banks, who are seeking to fulfill regulatory requirements regarding the reporting and classification of distressed or suspicious accounts in the corporate sector.
