Bombay High Court Lifts Stay on Banks’ Fraud Proceedings Against Anil Ambani

“Interim Injunction Cannot Become Final Relief in Disguise”, On 23 February 2026, the Bombay High Court delivered a reportable judgment setting aside a sweeping interim injunction that had restrained multiple banks from acting on a Forensic Audit Report dated 15 October 2020 and from proceeding with fraud classification actions.

A Division Bench of Chief Justice Shree Chandrashekhar and Justice Gautam A. Ankhad held that the RBI Master Directions on Frauds, 2024 operate prospectively and do not nullify actions validly taken under the RBI Master Directions, 2016. The Court found the Single Judge’s order “perverse”, legally unsustainable, and procedurally improper, observing that the interim relief had effectively granted the final declarations sought in the suits.

The appeals filed by Bank of Baroda, IDBI Bank, Indian Overseas Bank and BDO India LLP were allowed, and the interim injunction dated 24 December 2025 was set aside.

Challenge to Forensic Audit and Fraud Declaration

The respondent, Anil D. Ambani, had instituted three suits challenging the validity of the Forensic Audit Report prepared by BDO India LLP and consequential show-cause notices and fraud classification proceedings initiated by various banks. He contended that the audit was invalid under the RBI Master Directions, 2024, that the signatory was not a Chartered Accountant under Section 141 of the Companies Act, 2013, and that the entire process was vitiated for non-compliance with statutory requirements.

The learned Single Judge restrained the banks from proceeding further, recording prima facie satisfaction that the Forensic Audit Report was “not being in consonance with the RBI Master Directions” and that the qualification of the signatory went “to the root of the matter.”

This order was challenged before the Division Bench.

“Actions Taken Under Master Directions-2016… Shall Remain Alive”

The central question before the Division Bench was whether the RBI Master Directions, 2024 superseded and invalidated actions taken under the 2016 Directions.

Rejecting the retrospective application theory, the Court held:

“In our opinion, the actions taken under the Master Directions-2016 which are not repealed shall remain alive for all future purposes.”

The Bench clarified that the 2024 Directions “built upon, improvised and consolidated” the earlier framework but did not extinguish concluded actions. The absence of a specific saving clause did not render prior executive decisions invalid.

“There is no force in the submission that the Master Directions-2016 are not preserved through a saving clause.”

The Court emphasized that the Master Directions are issued in public interest to secure public money and facilitate early detection of fraud, and cannot be interpreted in a manner that prejudices lender banks.

“Clause 8.8.2… Does Not Contemplate a Mandatory Forensic Report by a Chartered Accountant”

A key plank of the respondent’s case was that the forensic audit was invalid because it was not conducted by a Chartered Accountant registered under the Companies Act, as allegedly required by Footnote 14 to Clause 4.1.1 of the 2024 Directions.

The Division Bench rejected this interpretation, holding that Clause 8.8.2 of the 2016 Directions expressly permitted banks to use “external auditors, including forensic experts or an internal team” for investigation.

“Clause 8.8.2 also does not make a distinction between the external auditor or a forensic expert or an internal team.”

The Court noted that the Companies Act does not define “external auditor” or “forensic expert” in this context and that the 2016 Directions did not mandate engagement of a statutory auditor under Section 141.

The finding that the Forensic Report was invalid for want of a Chartered Accountant signatory was termed “clearly perverse and liable to be set aside.”

“Disclaimer” Misread – Forensic Report Not Rendered Invalid

The Single Judge had relied upon disclaimer clauses in the report to conclude that the audit was inconclusive and legally suspect. The Division Bench disagreed.

“A disclaimer is essentially aimed at ensuring that the author of the document is not held responsible for any consequences… The learned Single Judge quite clearly misconstrued the object and true meaning of a ‘Note’ and the ‘disclaimer’.”

The Court held that such clauses are common in professional reports and do not strip the document of legal value.

“A Court Cannot Rewrite the Pleadings”

In strong observations on procedural propriety, the Bench found that the Single Judge had travelled beyond the pleadings and relied on issues neither pleaded nor argued.

“The learned Single Judge has rewritten the plaint.”

The Court reiterated settled principles that interim injunction must be grounded in the pleadings and material placed by the parties, and that courts cannot introduce new foundational issues suo motu.

“Interim Order… Amounts to Granting Mandatory Injunctions and Declarations”

The Division Bench held that the impugned order effectively granted final relief at an interlocutory stage.

“The order… staying all actions taken by the appellant-Banks… shall necessarily amount to granting mandatory injunctions and declarations which are the main reliefs in the suit.”

The Court emphasized that the triple test of prima facie case, balance of convenience and irreparable loss was not satisfied.

“A mere triable issue is not a ground to grant an interim injunction the effect of which would be to interrupt the pending proceedings…”

“No Irreparable Injury Would Be Caused”

On balance of convenience, the Court observed that the respondent had received the Forensic Report in 2021 and had engaged in multiple proceedings without raising the issue of auditor qualification until 2025.

“There is no prima facie reason to grant an interim injunction in favor of the respondent.”

The Court held that continuation of fraud classification proceedings would not cause irreparable injury, especially where opportunities of hearing had been afforded.

Appellate Interference Justified

While acknowledging that appellate courts are ordinarily slow to interfere with interim orders, the Bench held that interference was warranted where the order suffers from perversity and procedural impropriety.

“The impugned judgment suffers from procedural irregularity and impropriety, and is illegal.”

The appeals were accordingly allowed, the judgment dated 24 December 2025 was set aside, and the interim applications were dismissed. The suits will proceed on merits without being influenced by the Single Judge’s observations.

The ruling clarifies that the RBI Master Directions, 2024 do not retrospectively nullify forensic audits conducted under the 2016 regime and that an “external auditor” under RBI fraud directions is not synonymous with a statutory auditor under the Companies Act. It further reinforces that interim injunctions cannot be used as a device to stall regulatory fraud proceedings by granting, in substance, final relief at the threshold.

Date of Decision: 23 February 2026