Bank of Baroda classifies Anil Ambani and RCom as ‘fraud’, alleges fund diversion

In a significant development, state-owned Bank of Baroda (BoB) has classified the loan accounts of debt-laden Reliance Communications Limited, also RCom, and its former chairman, Mr. Anil Dhirubhai Ambani, as “fraud”, alleging a systematic diversion and misappropriation of funds.

The bank issued a detailed “Reasoned Order” on September 2, 2025, following a protracted process that included a forensic audit and multiple show-cause notices. The total outstanding exposure classified as fraud amounts to approximately ₹1,656.07 crore.

RCom, which has been undergoing a Corporate Insolvency Resolution Process (CIRP) since 2018, promptly disclosed the development to the stock exchanges on Thursday, as mandated by market regulator SEBI.

The Bank’s Allegations

The bank’s action is based on a Forensic Audit Report (FAR) prepared by BDO India LLP in October 2020. The report allegedly uncovered a series of financial irregularities during the period prior to RCom’s insolvency, including:

• Systematic misutilization of borrowed funds contrary to the sanctioned purpose.
• Diversion of loan proceeds through unauthorized channels and intermediary entities.
• Execution of unauthorized transactions with related parties.
• Improper utilization of Inter-Corporate Deposits (ICDs).
• Deliberate recycling of funds to create artificial transactional layers.

In its 27-page order, the bank detailed a lengthy procedural history, stating it provided Mr. Ambani with multiple opportunities to respond to the allegations, including extensions and a personal hearing on July 18, 2025. The bank concluded that his responses were “repetitive,” “evasive,” and failed to provide any “credible documentary evidence” to counter the specific findings.

“The Committee arrives at the incontrovertible conclusion that the financial irregularities, fund diversions, and fraudulent activities… stand duly established,” the BoB order stated.

RCom’s Stance: Insolvency Shield

In its response to the bank and in its stock exchange filing, RCom, now managed by a resolution professional, argued that the bank’s action is legally untenable. The company cited the moratorium imposed under the Insolvency and Bankruptcy Code (IBC), which prohibits the continuation of any legal proceedings against a company undergoing CIRP.

Crucially, RCom also pointed to Section 32A of the IBC, which grants immunity to a corporate debtor from prosecution for offenses committed prior to the insolvency commencement date once a resolution plan is approved. A resolution plan for RCom was approved by its Committee of Creditors (CoC) in 2020 and is currently awaiting approval from the National Company Law Tribunal (NCLT).

Anil Ambani’s Robust Defense

A spokesperson for Mr. Anil Ambani issued a strong rebuttal, categorically denying all allegations.

The spokesperson emphasized that Mr. Ambani served only as a Non-Executive Director of RCom from 2006 until his resignation in 2019 and “had no role whatsoever in the day-to-day operations or decision-making of the company.” He was never an Executive Director or a Key Managerial Personnel (KMP).

The statement highlighted the “inordinate lapse of more than 10 years” before select lenders from the 14-bank consortium initiated “staggered and selective” proceedings targeting Mr. Ambani. It also placed the onus on the lenders, led by SBI, for not completing the resolution process, which has been pending before the NCLT and the Supreme Court for six years.

“Mr. Anil D. Ambani categorically denies all allegations and charges and shall pursue remedies available to him in accordance with legal advice,” the spokesperson said.

What Happens Next?

The classification mandates BoB to immediately report the accounts as fraud to the Reserve Bank of India (RBI) and other authorities. This could have implications for the long-pending resolution plan, potentially creating uncertainty for the successful resolution applicant.

Mr. Ambani is expected to challenge the bank’s order in the appropriate legal forum. The move by BoB sets the stage for a fresh legal battle, centering on the interpretation of an executive director’s responsibilities, the validity of a fraud classification during an ongoing insolvency, and the application of the IBC’s immunity clause.

Also See: BoI classifies Reliance Communications loan accounts as fraud