Shares of Anil Ambani’s Reliance Power and Reliance Infra have dropped by 2% after Bombay High Court ruled that industrialist Anil Ambani was not entitled to a personal hearing before the State Bank of India (SBI) classified Reliance Communications Ltd (RCom) as a fraud account, upholding the bank's order. It held that the bank had complied with the principles of natural justice by allowing written representation.In a detailed order made available a bench of Justices Revati Mohite Dere and Dr Neela Gokhale, while dismissing Ambani's petition, said, "The principles of natural justice demand that the borrowers must be served a notice, furnished with the forensic audit report and allowed to submit their representation before their account is classified as fraud."The Bench rejected Mr. Ambani’s petition on October 3; the judgement of the order was made available on October 7.
Ambani claimed that he was denied a personal hearing, breaching principles of natural justice, and said the notice lacked specific allegations or timelines, making it impossible to respond effectively. Emphasizing that he was a non-executive director and not involved in RCom’s day-to-day operations, Mr. Ambani contended he should not be held liable for the company’s alleged irregularities. Senior advocate, Aspi Chinoy for SBI, countered that Mr. Ambani had no right to a personal hearing under RBI’s Master Directions or the Supreme Court’s ruling in Rajesh Agarwal. The bank argued that natural justice requires only an opportunity to make a written representation, which Mr. Ambani was given but failed to utilise. It maintained that the supersession of the 2016 guidelines by the 2024 directions did not invalidate the show-cause notice and said, “Issuance of Master Directions 2024 does not invalidate the SCN issued prior to the said Directions, the process initiated by SBI by issuing impugned SCN continues post 2024 Master Directions.” SBI also stressed that promoters and directors in control of a company are liable when its account is declared fraudulent, “Once the Company’s account is classified or declared to be a fraud account, the promoters/directors who were in control of the Company are liable to penal measures and to be reported as fraud.”
Rejecting Mr. Ambani’s argument, the Bench noted, “We are not inclined to accept the arguments of Mr. Khambata that actions of the Bank pursuant to the SCN dated 20th December 2023 issued prior to the Master Directions 2024 are invalid.” The share price of Reliance Infrastructure has seen a significant decline in the past few months, losing 23.93 per cent so far this year.The share price of Reliance Power has inched up marginally in the past few months, rising only 1 per cent so far this year and 15.79 per cent in the last six months.SBI had accused Reliance Communications of misappropriation of bank funds by entering into transactions that violated the loan terms. Earlier this year, the bank lodged a complaint with the Central Bureau of Investigation (CBI), which subsequently searched premises linked to Reliance Communications and Ambani’s residence.The central agency registered the case after SBI claimed a loss of Rs 2,929.05 crore, allegedly caused by Reliance Communications and Anil Ambani through fund misappropriation.