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

Business Standard

a day ago

Reliance Communications has disclosed to the exchanges that the country's largest lender, State Bank of India (SBI), has decided to classify its loan account as 'fraud' due to irregularities in the conduct of the account. It has also decided to report both the account and Anil Dhirajlal 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 SCN (show-cause notice) 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 Reliance Communications on June 23, which the company received on June 30.
The company, however, clarified that the classification of 'fraud' by SBI is not expected to have any impact on its operations. It is also 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—currently awaiting approval from the National Company Law Tribunal (NCLT)—said the credit facilities referred to by the bank pertain to the period prior to the CIRP. As per 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.
Meanwhile, Anil Ambani's lawyers, responding to SBI's notice classifying Reliance Communications' account as fraud, said the bank had not responded to Ambani's communication challenging the validity of the SCN for almost a year, and had also not granted him a personal hearing to make submissions against the allegations. Additionally, they stated that the bank had withdrawn SCNs issued to other non-executive and independent directors of the company, but had not done so for Ambani despite his being a non-executive director not involved in the day-to-day affairs of the company.
The account was declared 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 reported the name of the borrowing entity and its promoters, directors and guarantors to the RBI. However, this classification was challenged in court and subsequently reversed.
The bank later reinitiated the process of fraud identification and served SCNs to the borrower and its promoters, directors and suspended directors in December 2023. In March 2024, SBI sent the forensic audit report to the promoters, directors and suspended directors, offering them an opportunity to make submissions, if any.
Meanwhile, Anish Nanavaty, resolution professional (RP) of Reliance Communications, responding to the bank's SCN on behalf of the corporate debtor in January 2024, said the bank could pursue any action against the erstwhile management, employees and personnel of the corporate debtor for any fraudulent action committed prior to the cutoff date.
Anil Ambani also responded to the bank's SCNs in January and March 2024, seeking documents and materials relied upon by the bank. In May 2024, Ambani, in his response, challenged the validity of the forensic audit report.
According to the bank, Reliance Communications, RITL and RTL received Rs 31,580 crore from banks, of which 44 per cent was used for loan repayments and 41 per cent for payments to connected parties. 'Utilisation of funds obtained from banks was traced and its utilisation was mapped from the sanction letter. Instances were identified where utilisation of loan amount was not as per terms mentioned in the sanction letter,' the bank said. Additionally, there was potential rerouting of bank loan funds and internal transfer of funds among Reliance Communications, RITL and RTL. Further, large portions of the loan proceeds were invested in fixed deposits and mutual funds, among other instruments.
Reliance Communications was admitted into CIRP in 2019. Lenders submitted claims amounting to around Rs 49,000 crore. Once among the largest telecom players in the country, Reliance Communications was the flagship firm of the Reliance Group.