MUMBAI: In a dramatic turnaround and a likely setback to the State Bank’s effort to recover its dues from RCom, the crippled telecom company that was promoted by Anil Ambani, state-run lender Canara Bank has informed the Bombay High Court that it has withdrawn its order classifying the loan as fraudulent.
Following this disclosure, a bench of justices Revati Mohite Dere and Neela Gokhale on Thursday disposed of the petition filed by Ambani challenging the bank's order issued last year, saying “nothing survives in it now,” and asked the bank to inform “the withdrawal order to the Reserve Bank,” a PTI report quoting the judge said Thursday.
In September 2024, Canara Bank became the first lender to classify the RCom account, which is has been in NCLT since 2019 and is yet to have a resolution, as fraudulent in its report to the Reserve Bank and the fraud classification though came out into the public domain only in November 2024 when the bank informed the exchanges.
The crippled company owes more than Rs 40,000 crore to a slew of lenders led by SBI and the loans became NPAs since March 2017.
According to Canara Bank, the RCom account was classified as fraudulent due to the non-utilisation of funds in accordance with the sanctioned terms, as well as the routing of the loan amount through RCom to Reliance Telecom for settling liabilities to connected or related parties. Additionally, loans availed were invested in mutual funds and fixed assets, which were liquidated immediately to make payments to related and non-related parties.
Canara Bank had earlier said RCom had misappropriated Rs 1,050 crore loaned from it in 2017, which were originally sanctioned for capex and paying off its existing debt.
The move was challenged by RCom in February 2025 in the Bombay HC, saying he was not given a personal hearing, which had been stayed and the final hearing was on Thursday.
During the final hearing, however, Canara Bank informed the HC that it has withdrawn its earlier decision to classify the Rcom loans as fraudulent.
On November 8, 2024, the bank had classified the loan account as “fraud” for reasons including that a Rs 1,050 crore loan extended in 2017 was “routed” to a group company to pay other liabilities to connected or related parties. The order was based on the February 2016 RBI master circular related to fraud accounts that laid guidelines for such declarations.
In March 2023, the Supreme Court had asked RBI to direct lenders to give a personal hearing to the borrower before tagging the loan account as fraudulent.
In his petition Ambani had contended that the fraud classification was issued on November 8, 2024, but was only communicated to him on December 25 2024, after the HC had already stayed a similar classification in a related matter. Ambani further claimed that Canara Bank had informed the RBI about the fraud classification as early as September 6, 2024, even before officially issuing the order.
On July 2, State Bank had also classified RCom as "fraud" and said it would name Ambani, who was its erstwhile promoter and director, in its report to the Reserve Bank.
SBI had said RCom had used as much as Rs 12,692.31 crore of bank loans which was 41% of the total loan, to pay connected parties through a web of inter-group transactions--while only Rs 6,265.85 crore was used to repay other bank loans as much as Rs 5,501.56 crore was paid to related or connected parties which were not aligned with sanctioned purposes.
On July 2, RCom informed exchanges that it was in receipt of the SBI letter dated June 23, 2025 and had said it would seek legal measures to protect its interests saying SBI did not hear it properly as prescribed by the Supreme Court or followed the RBI norms on classifying an loan account as fraud.
In a March 28, 2023 order, the apex court asked banks to provide borrowers with a personal hearing before classifying their loan accounts as fraudulent, citing the principles of natural justice, so as to ensure that borrowers have an opportunity to present their case before being labeled as fraudulent.
The SBI letter also said the bank has found deviation in utilisation of the loans involving complex web of fund movements across multiple group entities.
According to the report of the SBI’s fraud identification committee, of the total loan Rs 13,667.73 crore, about 44% was utilised for loan repayment and meeting other obligations, while Rs 12,692.31 crore or 41% of the total loan, was utilised to pay connected parties. Of this, Rs 6,265.85 crore was used for repaying other bank loans and Rs 5,501.56 crore was paid to related/ connected parties which were not aligned with sanctioned purposes.
Further, a Rs 250-crore loan from Dena Bank (meant for statutory dues) was not utilised as disclosed in the loan application. The loan was diverted to an RCom group firm Reliance Communications Infrastructure (RCIL) as an inter-corporate deposit and was later claimed to repay an external commercial borrowing loan.
The committee has also found that Rs 248 crore was sanctioned by IIFCL for meeting capital expenditure but RCom paid Rs 63 crore to Reliance Infratel (RITL) and Rs 77 crore to RIEL for laon repayment.
"But instead of transferring the fund directly to these companies it was routed through RCIL, reason for that has not been given by the management or by Ambani. These (Dena Bank and IIFCL loan use) appear to be fund misappropriation in breach of trust," SBI said.
SBI also observed potential routing of bank loans by RCom group including mobile tower firm Reliance Infratel, telecom services arm Reliance Telecom, RCom Infrastructure, Netizen, Reliance Webstore etc. RCom, RITL, and RTL engaged in inter-corporate deposit transactions totalling Rs 41,863.32 crore of which only Rs 28,421.61 crore was traceable. Also, RCom used a Rs 100-crore intraday limit to cycle funds through group entities including RWSL, RTL, RCIL multiple times in a single day.
"These transactions do not appear to be genuine or conducted in a normal course of business. It appears that RCom has utilized intra-day limits to finance RWSL to pay collection proceeds worth Rs 1,110 crore. As a result, debtors of RTL got reduced by that extent... transactions can be termed as manipulation of books of accounts through fictitious accounts," the report said.