SBI Identifies Anil Ambani’s RCom Loan Account as Fraudulent

In a significant development, the State Bank of India (SBI) has classified the loan account of Reliance Communications (RCom) as fraudulent, implicating former director Anil Ambani. This decision, disclosed by RCom on July 1, indicates that SBI intends to report Ambani to the Reserve Bank of India (RBI). The classification is part of ongoing insolvency proceedings for the telecom company and follows a forensic audit that raised serious concerns about financial irregularities.

Background of the Fraud Classification

The classification of RCom’s loan account as fraudulent stems from a forensic audit conducted by BDO in 2020. This audit prompted SBI’s fraud panel to take action against the company. In November 2024, Canara Bank had previously declared the loan as fraudulent, but this decision was later overturned by the Delhi High Court. The current classification by SBI has reignited legal disputes surrounding RCom’s financial practices amid its ongoing insolvency proceedings.

Ambani’s legal representatives have criticized SBI’s decision, arguing that it was made without proper due process. They claim that the order was issued ex parte, meaning without Ambani’s presence or input, and violated principles of natural justice. The lawyers contend that the show-cause notices issued by SBI are outdated according to revised RBI guidelines and that Ambani had no active role in the company’s operations during the relevant period.

Allegations of Financial Misconduct

SBI’s review, concluded on June 13, identified several financial irregularities within RCom. The findings allege that approximately ₹12,692 crore, which constitutes 41% of the total loans amounting to ₹31,580 crore, was diverted to connected parties. The report suggests that sanctioned funds were misused, funneled through subsidiaries to obscure transactions, and utilized in inter-company loans that distorted the company’s financial records.

Additionally, the review highlighted circular transactions involving inter-corporate deposits (ICDs) and intraday limits as attempts to raise funds while concealing critical information. These allegations paint a troubling picture of RCom’s financial management and raise questions about the oversight of its operations.

Legal Implications and Responses

In response to SBI’s classification, RCom has stated that the decision will have no adverse impact due to protections under the Insolvency and Bankruptcy Code. These protections include immunity from past actions once a resolution plan is established. Ambani’s legal team has also pointed out that the SBI order contradicts several Supreme Court and Bombay High Court rulings, as well as RBI regulations.

The lawyers argue that SBI has ignored Ambani’s objections for nearly a year and failed to provide essential documents necessary for a proper response. They have called for the withdrawal of the order and requested a personal hearing to address the allegations. The situation remains fluid as RCom navigates its insolvency proceedings while facing serious accusations of financial misconduct.

Future Outlook for Reliance Communications

As Reliance Communications continues to grapple with its financial challenges, the classification of its loan account as fraudulent adds another layer of complexity to its ongoing insolvency proceedings. The company is currently under the supervision of a resolution professional appointed by the National Company Law Tribunal (NCLT). RCom has indicated that it will pursue all available legal avenues to contest SBI’s decision and protect its interests.

The outcome of this situation will be closely monitored, as it not only affects RCom and its stakeholders but also has broader implications for the telecom sector in India. The legal battles ahead will likely shape the future of the company and its ability to recover from its current financial predicament.

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