The Supreme Court has refused to interfere with a Bombay High Court judgment which set aside a Single Bench's stay on fraud classification proceedings initiated against Anil Ambani by Bank of Baroda, Indian Overseas Bank, and IDBI Bank.

The Court emphasized the gravity of allegations involving the siphoned funds of taxpayers and noted that regulatory measures are essential to protect public money.

While the Court declined to stay the ongoing investigation or the "fraud" classification process, it clarified that the observations made by the High Court's Division Bench would have no bearing on the final outcome of the pending suit.

Furthermore, the Bench requested the High Court to expedite the disposal of the main matter.

The Bench of Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice Vipul M Pancholi ordered, "We see no ground to entertain the present petitions. However, it is clarified that the observations of the Division Bench shall have no bearing in the pending suit. Subject to cooperation that may be extended by parties, the High Court is requested to expedite the disposal of the suit...Ld. Senior Counsel Mr Kapil Sibal would like to state that he would like to approach for the settlement, we clarify that we do not want to express anything on that."


Senior Advocates Kapil Sibal, Shyam Diwan and Narender Hooda appeared for Anil Ambani, whereas Solicitor General Tushar Mehta appeared for the Respondents.

The impugned judgment, pronounced on February 23, 2026, by the Bombay High Court, which arose from a batch of appeals filed by Bank of Baroda, IDBI Bank Limited, Indian Overseas Bank, and BDO India LLP. The Respondents/Appellants challenged a common order dated December 24, 2025, which had granted interim relief to Anil Ambani, by staying all actions based on a Forensic Audit Report (FAR) dated October 15, 2020.

Sibal challenged the Division Bench's judgment, primarily arguing that the classification of an account as "fraudulent" constitutes "civil death" for a borrower, as it permanently bars them from accessing credit.

Sibal contended that such a severe declaration must be based on a legally valid audit. He raised a jurisdictional objection, asserting that the Forensic Audit Report was fundamentally flawed because the individual who conducted it was not a qualified Chartered Accountant and therefore lacked the legal standing to perform a statutory audit.

Sibal further argued that the High Court’s Division Bench erred in reversing the Single Judge's interim stay. He maintained that an interim order should not be upturned unless it is found to be "totally perverse," especially when significant questions of law regarding the auditor's qualifications remain. He pointed out that the auditor himself had purportedly acknowledged not being a Chartered Accountant.

Additionally, Sibal noted the practical difficulty of the case, stating that since the company was under a Resolution Professional, all records were with the company, leaving the respondent without the necessary documents to defend himself effectively.

The Court expressed strong reservations about interfering with the investigation into the alleged siphoning of thousands of crores of taxpayers' money. The Court remarked that the primary objective of these regulatory actions is to prevent further frauds and protect public funds.

The Court noted that since show-cause notices had already been issued, the respondent had the liberty to raise all legal and factual defenses before the appropriate authorities rather than seeking a stay on the investigation at this stage.

CJI remarked that the Court could not express an opinion that might prejudice the ongoing investigation but emphasized the gravity of the financial loss to institutions.

Justice Bagchi said that there was a specific finding regarding the diversion of funds, which underscored the gravity of the allegations. Sibal countered this by clarifying that the report only suggested a "potential" diversion and did not reach a definitive conclusion of fraud. He emphasized that since the matter was still to be heard and the individual in question was not a qualified auditor, they lacked the legal authority to make a final determination on such a serious charge.

Senior Advocate Shyam Diwan, also appearing for Ambani in another connected SLP, submitted, "In this country this can be done only by a Chartered Accountant...As your lordship correctly noticed in the observations, there are two requirements. First is qualification and second is experience. And what your lordship correctly pointed out in terms of paragraph 40 of the Division Bench judgment etc, was the latter, which is experienced. You may have experience...But you may not have the qualification. If you do not have the qualification, in our understanding, it’s fatal."

He added, "Now I’ll tell you why. What is happening and what has been contemplated and what your lordships have now held is, that when there is a declaration that they are a classification eventually by a bank, this falls under the caption of fraud, then there are huge civil consequences and your lordship correctly also observed. There are criminal consequences which may also flow. Now, when you have enormous civil consequences and criminal consequences which flow, in our understanding of the law, that particular."

He also submitted, "A forensic audit which is required has to be done by a person who holds the requisite qualification. Now the first question is why? The reason is that across the country and across several professions, it could be the law, it could be chartered accountancy, it could be medicine. We have Regulating organizations. So if a person without qualification issues a, a wrong report or is negligent or condemns somebody because of the huge criminal consequences that flow, he or she is subject to a disciplinary jurisdiction...Now the first question I ask myself is that if you are not a qualified account a chartered accountant, you are not subject to anybody's disciplinary oversight, which is exactly the case here."

Chief Justice Kant said that the main suit challenging the report is still pending before the High Court. He remarked that if the High Court ultimately finds the report to be untenable, it could be set aside entirely. However, at the current stage of seeking an injunction, the Court’s role is limited to determining whether, on a prima facie basis, the auditing entity possessed the necessary qualifications to conduct the forensic exercise. The Bench indicated that a full-scale merit review might be premature while the lower court is still seized of the main matter.

Divan highlighted a distinction within the RBI guidelines concerning individual banks versus consortium lending. He pointed out that while an individual bank might have the discretion to engage various external auditors or forensic experts, the rules under Clause 8.9 specifically govern lending under a consortium.

He argued that for large-scale consortium arrangements, the requirements for who can conduct such an audit are more stringent and must be strictly adhered to, suggesting that the appointment of the auditor in this case did not meet the specialized criteria required for consortium-led forensic investigations.

"Nationalised banks have engaged the services...We will be substituting the wisdom of the banks...it is them who know the best to go into all these account...it is their money which, according to them, has been siphoned", the Chief Justice remarked.

Senior Advocate Kapil Sibal also asked the Court to record the statement that the Petitioner would like to settle the matter, which was strongly opposed by the Solicitor General.

The dispute originated from the insolvency proceedings of Reliance Communications Limited (RCOM) and its group companies, which were admitted into the Corporate Insolvency Resolution Process (CIRP) in May 2018. Anil D. Ambani, who served as a non-executive director of RCOM, contended that his role was limited and did not involve day-to-day financial management. Following the company’s financial distress, a Forensic Audit Report was prepared by BDO India LLP. Based on this report, various banks issued show-cause notices and subsequently classified Ambani as a "fraud" under the RBI Master Directions. Aggrieved by these actions, Ambani filed three pleas before the High Court seeking damages of ₹25 crores and a stay on the banks' proceedings.

The Single Judge had previously recorded a prima facie satisfaction that the Forensic Audit Report was not in consonance with the RBI Master Directions. The Single Judge observed that since the report appeared to be prepared by an entity not legally qualified to conduct a statutory forensic audit, any action taken in reliance on such a report was potentially invalid. Consequently, the Single Judge granted interim relief, restraining the banks from proceeding with show-cause notices or taking further action under the FAR.

The Banks then filed appeals before the High Court, assailing the judgment passed by the Single Judge. The Division Bench set aside the previous interim stay and allowed the appeals filed by the banks and the auditor. The Bench termed the earlier order as "illegal and perverse," stating that it suffered from procedural irregularities and impropriety. The Bench rejected the technical objections regarding the qualification of the auditor (BDO India LLP). It held that the Master Directions of the RBI allow banks to engage external auditors, including forensic experts. The Court noted that BDO India LLP is an accounting consultancy firm empanelled by both the Indian Banks Association (IBA) and SEBI for such specialized audits.

The Division Bench observed that the RBI Master Directions of 2016 (applicable at the time) did not contemplate a mandatory forensic report signed by a Chartered Accountant under the Companies Act before a bank could take a final decision on fraud classification.

The Bench held that the Master Directions are issued in the interest of Banking Policy and to protect the financial system from unscrupulous borrowers. It emphasized that courts should not interpret these directions in a way that causes prejudice to lender banks or harms their interest. The Court remarked that every minor technical violation of RBI rules is not subject to judicial scrutiny.

The Court observed that continuing the proceedings against the respondent would not cause "irreparable injury." It noted that the fraud classification process is a regulatory necessity. The Bench also pointed out that the challenge to the 2020 Forensic Audit Report was belated, as it was raised several years after the report was issued and only after the "fraud" tag was imminent.

After pronouncing the judgment, Ambani requested a four-week stay on the operation of this order to allow them to approach the Supreme Court. The Division Bench declined this request, stating that since it had found the earlier stay to be illegal, allowing it to continue for another four weeks would only "perpetuate the illegality."

Cause Title: Anil D Ambani v. Bank of Baroda and Ors. [SLP(C) No. 12943 - 12944/2026], Anil D Ambani v. IDBI Bank Ltd. and Ors. [SLP(C) No. 12747-12748/2026] and Anil D Ambani v. Indian Overseas Bank and Ors. [SLP(C) No. 10845-10846/2026]

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