Bank of India Classifies Anil Ambani and Reliance Communications as Fraudulent Following SBI's Lead

Bank of India has labelled Reliance Communications' loan account as fraudulent, following the State Bank of India's earlier action. The bank cited alleged fund diversion in 2016 and named former director Anil Ambani in a regulatory filing. In August 2016, Bank of India provided a Rs 700 crore loan to Reliance Communications for capital and operational expenses, but half was improperly invested in a fixed deposit.

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Reliance Communications disclosed receiving a letter from Bank of India on August 22, stating the decision to classify the loan accounts of the company and its former directors, including Anil Ambani, as fraudulent. This follows similar actions by the State Bank of India in June, which accused the company of misusing funds through transactions that breached loan terms.

Allegations and Investigations

The Central Bureau of Investigation conducted searches at locations linked to Reliance Communications and Anil Ambani's residence after SBI's complaint. SBI reported a loss of Rs 2,929.05 crore due to alleged misappropriation by Reliance Communications and Ambani, Mukesh Ambani's younger brother.

Anil Ambani's spokesperson responded to these developments, stating that the Bank of India's actions relate to matters over a decade old. The spokesperson highlighted that Ambani served only as a non-executive director until 2019 and had no involvement in daily operations or decisions.

Legal Proceedings and Responses

The spokesperson criticised Bank of India for not adhering to natural justice principles, noting that while a Show Cause Notice was issued to Anil Ambani, necessary documents were not provided. Furthermore, Ambani was denied a personal hearing, contrary to Reserve Bank of India regulations and Supreme Court judgments.

Bank of India issued a Show Cause Notice to 13 directors and key managerial personnel of RCom but withdrew it against others while continuing proceedings against Anil Ambani. The spokesperson pointed out that RCom had a consortium of 14 banks, yet some lenders initiated selective proceedings after more than ten years.

Financial Implications

Anil Ambani denies all allegations and plans to seek legal remedies. Reliance Communications' subsidiary, Reliance Telecom Ltd, also received notice from Bank of India about classifying its loan accounts as fraudulent. Banking laws require fraudulent accounts to be referred for criminal action, barring borrowers from fresh finance for five years.

According to Bank of India's letter disclosed by Reliance Communications, RCom became a non-performing asset on June 30, 2017, with an outstanding amount of Rs 724.78 crore. Despite follow-ups for repayment, borrowers have failed to settle dues.

Current Status and Future Steps

In April, Reliance Communications revealed its total debt was Rs 40,400 crore as of March. Due to unpaid loans, the company entered insolvency proceedings under creditor supervision led by SBI and overseen by a resolution professional. The case is pending before the NCLT and other courts for six years.

With inputs from PTI