SBI classifies loan to Reliance Communications as fraud, to report Anil Ambani to RBI

Reliance Communications Ltd (RCom) on Tuesday disclosed that State Bank of India (SBI) has classified its loan account as fraudulent and intends to report Anil Dhirajlal Ambani, former director of the company, to the Reserve Bank of India (RBI).

In a stock exchange filing, RCom, which is currently undergoing corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016, said that SBI has communicated its decision following an internal review.

According to SBI’s communication, the Fraud Identification Committee of the bank concluded that responses received to its earlier show cause notices were unsatisfactory.

“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 Limited,” SBI said.

As a result, SBI said it will classify the loan account as fraud and initiate steps to report the account and the name of Anil Ambani, who was a director during the relevant period, to the RBI in accordance with applicable regulatory guidelines.

RCom noted that its operations remain under the protection of the Insolvency and Bankruptcy Code, specifically citing Section 14(1)(a), which prohibits the initiation or continuation of legal proceedings during CIRP. Further, it pointed to Section 32A, which provides immunity to the corporate debtor for offences committed prior to CIRP, subject to a change in management upon implementation of the approved resolution plan.

The company added that a resolution plan has already been approved by its committee of creditors and is currently awaiting the National Company Law Tribunal (NCLT)'s approval.

“The company does not expect the classification of the account as fraud to have any material impact,” Rcom said The company added that it is in the process of seeking legal advice to determine the appropriate course of action.