Mumbai, Oct 7 (PTI) The Bombay High Court while upholding an order of the State Bank of India (SBI) classifying the accounts of industrialist Anil Ambani and Reliance Communications as fraud has said it was a reasoned order, and did not have any legal flaw.

A bench of Justices Revati Mohite Dere and Neela Gokhale on October 3 dismissed a petition filed by Ambani, challenging the SBI order.

The judgment, a copy of which was made available on Tuesday, said there was no merit in Ambani's plea as there was no "infirmity" in the SBI order of June 13, 2025.

The court did not entertain the industrialist's contention that the order should be held as null and void because he was not given a personal hearing, and relevant documents were not furnished to him.

The right available under the Reserve Bank of India's (RBI) Master Directions, under which the SBI passed its order, is that of making a representation and not of personal hearing, the high court noted.

Ambani had submitted his response to the show-cause notice issued by the SBI last year, and only when there was no response to the last communication, the bank passed the order classifying the account as fraud, the court said.

Further, Ambani never made any request for a personal hearing, it noted.

The principles of natural justice cannot be applied in a straitjacket formula, the court said adding in the present case Ambani was afforded an adequate opportunity to submit his objections in writing.

"Hence, the requirement of fairness and compliance with the principle of natural justice, stood satisfied," the court held.

Ambani had challenged the June order of the SBI classifying the account of Reliance Communications and his own account as fraud in terms of the `Master Directions on Fraud Risk Management in Commercial Banks (including Regional Rural Banks) and All India Financial Institutions.' The high court noted that the bank had issued a show-cause notice to Ambani last year. But he failed to reply to the notice and continued to seek documents, leading to SBI finally passing the order.

Anil Ambani claimed in his petition that he was not given a personal hearing and not provided with the relevant documents. Hence, the order was illegal, he argued.

He also claimed that he was not a whole-time director of the company, and hence his account should not have been classified as fraud.

But the high court said that once a company's account is declared to be a fraud account, the promoters/ directors who were in control of the company are also liable for penal measures. It could be seen that Anil Ambani exercised control over Reliance Communications, the HC said.

SBI claimed before the high court that as per the RBI's Master Directions circular, no personal hearing was required to be given.

The bench, after going through the circular and earlier Supreme Court judgments, said the principles of natural justice demand that borrowers must be served a notice, furnished with all documents, and allowed to submit their representation.

"The right contemplated is one of representation, not necessarily of personal hearing," HC said.

SBI had accused Reliance Communications of misappropriation of bank funds by entering into transactions that violated the terms of its loans.

The bank also lodged a complaint earlier this year with the Central Bureau of Investigation (CBI) which searched premises linked to Reliance Communications and Ambani's residence.

The central agency registered a complaint after SBI claimed a loss of Rs 2,929.05 crore, resulting from alleged misappropriation by Reliance Communications and Anil Ambani. PTI SP KRK

Fraud classification: bank's reasoned order upheld as valid where written representation satisfied natural justice requirements. The High Court upheld SBI's reasoned order classifying Reliance Communications' and Anil Ambani's accounts as fraud, concluding the RBI Master Directions confer a right of representation-not an entitlement to personal hearing-and that the bank had provided adequate opportunity for written objections, satisfying natural justice. The court further held that promoters/directors who exercised control may be held liable when a company's account is declared fraudulent, and noted the bank's allegations of misappropriation and its referral to investigative authorities.