SBI’s fraud tag on Anil Ambani sparks legal challenge: Was due process ignored?

India’s largest lender, the State Bank of India (SBI), is reportedly under fire for classifying Reliance Communications (RCOM) and its former director, Anil D. Ambani, as fraud. The move, passed through an ex-parte order in June 2025, has been branded “arbitrary and discriminatory” by Ambani’s counsel, who argue that the decision violates the principles of natural justice laid down by the Supreme Court.

Counsel’s objections to SBI’s move

According to Zee Business, Ambani’s lawyers say SBI’s Fraud Identification Committee passed its order without giving him a personal hearing, a requirement mandated by multiple rulings, including SBI v. Rajesh Agarwal (2023), T. Takano v. SEBI (2022), Milind Patel v. Union Bank of India (2024), and Ankit Bhuwalka v. IDBI Bank (2025).

The counsel further alleges that SBI withheld key annexures of the forensic audit report. One annexure, meant to contain revenue breakup details, was reportedly shared in an incomplete form showing only icons instead of data sheets. This, they argue, deprived Ambani of a fair chance to respond.

Adding to this, SBI had in April 2025 withdrawn show-cause notices against five non-executive directors of RCOM, including former SBI chairman Arun Purwar and ex-LIC chief Raj Narain Murari L. Bhardwaj, acknowledging they had no role in daily operations. Yet Ambani alone continues to face fraud action, raising concerns of selective treatment.

What makes the matter more complex is the stance of other lenders. On 10 July 2025, Canara Bank, another consortium member, unconditionally withdrew its fraud classification against RCOM and Ambani before the Bombay High Court. As per PTI, the bank admitted the classification “could not be sustained in law.” This contradiction within the lenders’ consortium highlights a lack of uniformity.

SBI’s position

SBI, for its part, maintains that its order is consistent with the Reserve Bank of India’s Master Directions on fraud reporting. The bank points to findings of fund diversion and irregularities in loan agreements, based on a forensic audit of RCOM’s accounts. As reported by Reuters, the bank argues that it is duty-bound to report fraud cases to the RBI and file complaints with investigative agencies.

Why this matters?

Fraud classification has far-reaching consequences. Once tagged, borrowers and guarantors lose access to institutional credit for five years, and banks are required to lodge criminal complaints.

For Ambani, this action adds to a series of regulatory setbacks. As per Bloomberg, insolvency proceedings continue at the NCLT over his personal guarantees, including a ₹1,385 crore ($166 million) exposure to SBI. In July 2025, the Enforcement Directorate conducted raids on Ambani-linked firms in connection with alleged diversion of Yes Bank loans, according to PTI.

Meanwhile, SEBI in August 2025 rejected Ambani’s settlement plea in the Reliance Mutual Fund–Yes Bank AT1 bonds case, citing investor losses of ₹1,828 crore ($220 million), as reported by the New Indian Express. The government also told Parliament in July 2025 that SBI’s exposure to RCOM stood at over ₹3,000 crore ($360 million), including ₹2,227 crore in fund-based loans, as reported by Moneylife.

A long and winding legal battle

This is not the first time Anil Ambani and Reliance Communications have been caught in disputes with lenders over fraud classification. The saga dates back to November 2020, when SBI first declared RCom’s loan account fraudulent. In January 2021, SBI even lodged a complaint with the Central Bureau of Investigation (CBI), before the Delhi High Court stepped in and stayed the move, as per Reuters.

In March 2023, the Supreme Court ruled that borrowers must be given a hearing before such a classification. Following this verdict, SBI withdrew its fraud tag in September 2023. But the relief was short-lived. Between December 2023 and September 2024, fresh show-cause notices were issued to RCom and Anil Ambani. On 23 June 2025, SBI reinstated the fraud classification against the company, as reportedby PTI.

Meanwhile, other lenders also shifted their stance. On 29 April 2025, SBI withdrew showcause notices against five non-executive directors of the company, while on 10 July 2025, Canara Bank informed the Bombay High Court that it had withdrawn its fraud classification against RCom, according to Reuters.

The government has also been drawn into the matter. In July 2025, it told Parliament that SBI’s exposure to Reliance Communications stood at over ₹3,000 crore ($360 million), including ₹2,227 crore ($267 million) in fund-based loans, as reported by Moneylife. The same month, the Enforcement Directorate conducted raids on firms linked to Ambani over alleged diversion of loans from Yes Bank, according to PTI.

Separately, the Securities and Exchange Board of India (SEBI) rejected settlement pleas filed by Anil Ambani and others in August 2025, in a case concerning Reliance Mutual Fund’s investments in Yes Bank’s additional tier-1 bonds. The regulator cited investor losses of ₹1,828 crore ($220 million) as the reason for not accepting the settlement, as reported by the New Indian Express.

Alongside these cases, insolvency proceedings continue against Ambani’s personal guarantees, including a ₹1,385 crore ($166 million) exposure to SBI, which is being heard by the Mumbai bench of the National Company Law Tribunal (NCLT), as per Bloomberg.

The bigger picture

At the heart of the dispute is a critical question that can Indian banks enforce accountability in high-profile defaults while respecting due process and judicial precedents?

SBI’s firm stance, contrasted with Canara Bank’s withdrawal, underscores the lack of uniformity in how lenders approach fraud classification. For Ambani, the outcome of this case could determine not just access to credit, but also his standing in multiple ongoing legal and regulatory battles.

(With inputs from the agencies)