SBI marks Reliance Com loan as 'fraud', reports Anil Ambani to RBI

SBI tags Reliance Communications' loan as fraud citing irregularities and fund misuse before CIRP and reports Anil Ambani to RBI as per central bank's compliance norms

Reliance Communications (RCom) has disclosed to the exchanges that State Bank of India (SBI) has decided to classify the company’s loan account as 'fraud' due to irregularities in the conduct of the account.

 

The country’s largest lender has also decided to report both the account and Anil Ambani, who was a director at the company, to the Reserve Bank of India (RBI) in accordance with the central bank’s guidelines.

 

“We have taken cognisance of the responses (wherever received) to our show-cause notice (SCN) and after due examination of the same it is concluded that sufficient reasons have not been provided by the respondent, to explain the non-adherence to the agreed terms and conditions of the loan documents or the irregularities observed in the conduct of the account of Reliance Communications to the satisfaction of the bank,” SBI said in a letter to RCom on June 23, which the company received on June 30.

   

The company has, however, clarified that the classification of “fraud” by SBI is not expected to have any impact on it.

 

Furthermore, it is seeking legal advice on the way forward with respect to this development. 

 

The company, which is currently undergoing the corporate insolvency resolution process (CIRP) and has a resolution plan approved by its Committee of Creditors, said the credit facilities referred to by the bank pertain to the period prior to the CIRP. It is awaiting approval from the National Company Law Tribunal (NCLT)

 

According to the Insolvency and Bankruptcy Code (IBC), such claims are required to be resolved as part of the resolution plan or during liquidation, as the case may be, it said.

 

Additionally, the company has cited Section 32A of the IBC, which provides protection from liability for any alleged offences committed prior to the commencement of the CIRP, once the resolution plan is approved. 

 

 

Meanwhile, Anil Ambani’s lawyers, responding to SBI’s notice of classifying RCom’s account as fraud, said that SBI has not responded to Ambani’s communication about the invalidity of the SCN for almost a year. It has also not allowed Ambani an opportunity of personal hearing to make submissions against its allegations.

 

Additionally, they stated the bank has withdrawn SCNs to other non-executive and independent directors of the company. But it was not done for Ambani despite him being a non-executive director and not involved in day-to-day affairs of the company.

 

The account was declared as a non-performing asset (NPA) by the bank in August 2016. 

 

Following this, in October 2020, the bank had identified the account as “fraud”, and the name of the borrowing entity and its promoters/ directors/ guarantors were reported to the RBI. However, this was challenged in court, and the fraud classification was reversed.

 

However, the bank reinitiated the process of fraud identification in the account, and served SCN to the borrower and its promoter/ directors/ suspended directors in December 2023.

 

Subsequently, in March 2024, SBI sent the forensic audit report to the promoter/ director/ suspended director giving them an opportunity to make submissions, if any.

 

Meanwhile, Anish Nanavaty, resolution professional (RP) of RCom, responding to the bank’s SCN, on behalf of the corporate debtor in January 2024, said the bank can pursue any action against the erstwhile management, employees, and personnel of the corporate debtor for any fraudulent action committed prior to the cutoff date.

 

Ambani also responded to the bank’s SCNs in January and March 2024 seeking documents and materials relied upon by the bank.

 

Later in May 2024, Ambani, in his response to the bank, challenged the validity of the forensic audit report.