Anil Ambani’s Reliance Power Shares In Focus After Bombay High Court Stays Fraud Action

Anil Ambani’s Reliance Power shares remained in focus on Friday after the Bombay High Court granted interim relief to the ADA Group chairman by staying coercive action initiated by banks seeking to classify the accounts of his companies as “fraud”. The stock was trading at ₹37.90, down 0.68%, compared with its previous close of ₹38.16 on Wednesday, as markets were shut on Thursday on account of the Christmas holiday. Notably, the stock had surged nearly 5% on December 24 following the High Court’s ruling.

The interim relief was granted by a single-judge bench of Justice Milind Jadhav, which stayed action by Indian Overseas Bank, IDBI Bank and Bank of Baroda based on a forensic audit report prepared by BDO India LLP in October 2020. The court observed that the report could not be relied upon as it was not signed by a duly qualified chartered accountant, as mandated under the Reserve Bank of India’s Master Directions. Accepting Ambani’s prima facie arguments, the court said the balance of convenience lay in his favour and termed it “preposterous” to suggest that an external auditor lacking chartered accountant qualifications could be validly appointed under RBI norms.

The court further noted that allowing banks to declare Ambani and directors of his companies as “fraud” would lead to drastic and disastrous consequences, including blacklisting, denial of bank credit for years and the initiation of criminal proceedings, effectively resulting in civil death and impacting fundamental rights to financial access. The case pertains to show-cause notices issued to Ambani for classifying the loan accounts of Reliance Communications, Reliance Telecom and Reliance Infratel as “fraud” based on the forensic audit.

Ambani, a former non-executive director of Reliance Communications, had filed three separate petitions challenging notices issued between January and December 2024, seeking a stay on any coercive action. He argued that BDO India LLP, appointed by the SBI-led consortium of lenders, was not authorised to conduct the audit as the signatory was not a chartered accountant registered with the Institute of Chartered Accountants of India, despite the firm being paid ₹65 lakh as professional fees.

Rejecting the banks’ arguments, the High Court also flagged serious procedural lapses, noting that the auditor was appointed in 2019 to examine accounts for the period between 2013 and 2017 but took 17 months to submit the report, far exceeding the three-month timeline prescribed under RBI directions. The court said the RBI Master Directions were not a mere paper tiger and criticised banks for failing to adhere to early warning signals and timelines, warning that such lapses could have broader economic consequences. It also observed that the auditor’s independence appeared compromised, as BDO had participated in a joint lenders’ meeting and had earlier stated that no fraud or criminal breach of trust had been observed in the audit.