The Bombay High Court has issued pivotal directives concerning Anil Ambani's challenge against the Union Bank of India's classification of his loan account as fraud. On February 28, 2025, the court took notice of Ambani's complaints about how banks designate accounts as fraudulent, citing serious concerns over their procedural integrity.
A division bench comprising Justices Revati Mohite Dere and Neela Gokhale presided over the hearing, where Ambani had filed a petition disputing the bank's October 10, 2024, order. The court raised red flags about what it deemed the casual and reckless manner in which banks often treat such classifications. "There cannot be such cut, copy and paste orders. There has to be some application of mind. Eventually, this is public money. We cannot have such orders passed in such casual manner. There has to be some mechanism put in place," remarked Justice Mohite-Dere during the proceedings.
Ambani contended he was not granted any hearing prior to the declaration of his account being fraudulent, which raises questions about due process. He had sought not only copies of the show-cause notices issued by the bank but also the full audit report and the relevant documents underpinning the fraud classification. To his dismay, the bank did not furnish these necessary documents nor allowed him the opportunity for presenting his case.
During the hearing, the judges expressed frustration at the recurring incidents where banks label accounts as fraudulent without adhering to the guidelines articulated by the Reserve Bank of India (RBI) in their master circulars. They emphasized the pressing need for banks to abide by these regulations and underscored the potential risks of not doing so. Such careless practices could lead to significant misapplications of power and damage reputations unjustly.
Justice Gokhale highlighted the systemic issues prevalent within banking procedures, stating, "We feel this is being done deliberately. There have to be checks and balances; otherwise, this will go on." The court's remarks indicate deep concerns about the integrity of financial institutions and their decision-making processes.
The judges directed Ambani to file his complaint directly with the RBI, articulately clarifying the process for aggrieved individuals who believe their rights or due process have been violated. Venkatesh Dhond, the counsel representing RBI, explained, "Any aggrieved person can lodge a complaint with the RBI if they feel the bank’s order violated the principles of natural justice," albeit noting the RBI's limitation to review compliance with procedural requirements rather than the merits of the case.
This directive from the High Court not only sheds light on Anil Ambani's current predicament but also opens broader discussions about the practices of financial institutions across the country. This case could serve as precedent-setting, influencing how banks manage the classification of fraudulent accounts, especially when significant figures like Ambani are involved.
It remains to be seen how this matter will evolve as it is set for another hearing on March 13, where the Union Bank of India will be required to respond formally to Ambani's petition. The court's insistence on accountability within banking practices signifies the judiciary's role as watchdog, safeguarding against arbitrary actions against citizens and ensuring institutions are held accountable for their decisions.
While awaiting the next court date, the British High Court's remarks echo the concerns faced within India’s banking sector at large and the urgent need for reform. The focus now turns to how the RBI will respond to the High Court's directive, and whether it will implement measures to mitigate these issues for all stakeholders involved.