Bombay HC Clears Banks to Act on ‘Fraud’ Classification in Anil Ambani Loan Case

In a major legal setback for industrialist Anil Ambani, the Bombay High Court has lifted an interim stay that had prevented banks from classifying loan accounts linked to him as ‘fraud’, reviving action on borrowings exceeding ₹40,000 crore.

The decision allows public sector lenders, including Bank of Baroda, IDBI Bank, and Indian Overseas Bank, to restart fraud-classification proceedings that had been put on hold since December 2025. The stay had restrained banks from issuing or acting on show-cause notices related to the proposed fraud tag.

Loans Turned NPA, Forensic Audits Flagged Issues

The case stems from large corporate loans extended to Ambani-linked entities, including companies within the Reliance Communications group, which later slipped into default. Bank submissions to the court indicate that the combined outstanding exposure of multiple lenders runs into more than ₹40,000 crore, with repayments remaining irregular over a prolonged period.

Following the classification of these accounts as non-performing assets, banks ordered forensic audits to examine fund utilisation, transaction trails, and compliance with loan covenants. The audits reportedly flagged alleged irregularities. This prompted lenders to initiate steps under banking norms to classify the accounts as fraudulent. Ambani challenged these actions, arguing that the fraud-tagging process was flawed and that the reputational consequences were disproportionate. The High Court, however, held that the interim protection could not be allowed to continue, clearing the way for banks to act on their findings.

Why The Fraud Tag Matters? 

Once an account is tagged as fraud, banks are required to report the matter to the Reserve Bank of India and restrict further lending. It also triggers enhanced scrutiny of the borrower and promoters. For large corporate borrowers, such a tag can effectively shut the doors of the formal banking system.

With the stay lifted, lenders can now complete regulatory reporting and proceed with further action in accordance with applicable norms. The ruling comes ahead of Ambani’s scheduled appearance before the ED, which is examining alleged financial irregularities linked to group entities and high-value loans. 

Also read: Rs 590 Crore Fraud: IDFC FIRST BANK Management Responds