After SBI, Bank of India calls RCom loan a 'fraud'

Bank of India has declared Reliance Communications' (RCom) loan account as fraudulent and named former director Anil Ambani, citing alleged fund diversion in 2016, according to a regulatory filing. The move comes after a similar step by the State Bank of India (SBI) earlier this year.

In its August 8 letter, disclosed by RCom to the stock exchange on August 23, Bank of India said it decided "to classify the loan accounts of the company, Anil Dhirajlal Ambani (promoter and erstwhile director of the company), and Manjari Ashok Kacker (erstwhile director of the company), as Fraud."  

Bank of India had sanctioned a Rs 700 crore loan to RCom in August 2016 for capital and operational expenses as well as repayment of liabilities. The bank stated that half the disbursed amount, given in October 2016, was invested in a fixed deposit in violation of the sanction terms. The loan turned non-performing on June 30, 2017, with an outstanding of Rs 724.78 crore. 

"The Bank has been following up with the borrowers and guarantors for repayment of dues; however, they have failed and neglected to make repayment of the dues," the bank wrote.  

Reliance Communications' subsidiary Reliance Telecom Ltd (RTL) also received a notice from Bank of India classifying its loan accounts, and those of erstwhile director Grace Thomas and other individuals, as 'Fraud'.  

The latest action comes after SBI filed a complaint with the Central Bureau of Investigation (CBI), alleging a loss of Rs 2,929.05 crore due to misappropriation by RCom and Ambani. Following the complaint, CBI conducted searches at RCom-linked premises and Ambani's residence on Saturday.  

Ambani's spokesperson issued a strong denial. "The complaint filed by SBI pertains to matters dating back more than 10 years. At the relevant time, Ambani was a non-executive director of the company, with no involvement in the day-to-day management," the statement said. "It is pertinent to note that SBI, by its own order, has already withdrawn proceedings against five other non-executive directors. Despite this, Ambani has been selectively singled out."  

Under banking laws, accounts tagged as fraudulent must be referred to enforcement agencies for criminal action, while borrowers are barred from fresh loans for five years.  

RCom, which disclosed total debt of Rs 40,400 crore in March, is under insolvency and bankruptcy proceedings. Its operations are being supervised by a Committee of Creditors led by SBI and managed by a Resolution Professional.  

Commenting on the Bank of India's move, Ambani's spokesperson said," The action by Bank of India to classify the loan account of Reliance Communications Limited (RCom) along with Anil D. Ambani, pertains to matter dating back more than 10 years, as per disclosures and records available in the public domain. It is pertinent to note that Anil D Ambani served only as a Non-Executive Director on the Board of RCom and resigned from this position in 2019, over six years ago. He had no role whatsoever in the day-to-day operations or decision-making of the company. However, Ambani is being selectively singled out."

"Bank of India has classified RCom’s account without following the principles of natural justice. While a Show Cause Notice was issued to Mr. Ambani, the requisite documents were not furnished to him. Bank of India further deprived him of the opportunity of a personal hearing in the matter. These actions are contrary to the RBI regulations issued in July 2024, as well as to well-established law and the judgments of the Hon’ble Supreme Court and the Hon’ble Bombay High Court. Notably, Bank of India, after issuing a Show Cause Notice to 13 Directors and Key Managerial Personnel (KMPs) of RCom, unilaterally withdrew the same against all others. However, it selectively continued the proceedings against Mr. Anil D. Ambani without following the principles of natural justice," the statement added. 

"It is a matter of record that RCom had a lender consortium comprising 14 banks. Astonishingly, after an inordinate lapse of more than 10 years, select lenders have now chosen to initiate proceedings in a staggered and selective manner. At present, Reliance Communications is being managed under the supervision of a Committee of Creditors, led by SBI and overseen by a Resolution Professional. The matter remains sub judice, pending before the NCLT and other judicial forums, including the Hon’ble Supreme Court, for the past six years. Anil D Ambani categorically denies all allegations and charges and shall pursue remedies available to him in accordance with legal advice," the spokesperson said.

(With inputs from PTI)