The Supreme Court on Thursday declined to grant relief to industrialist Anil Ambani in a significant legal battle over the classification of loan accounts linked to him and Reliance Communications Ltd (RCom) as fraudulent.

A bench headed by chief justice of India Surya Kant, along with justice Joymalya Bagchi and justice Vipul M Pancholi, refused to interfere with a Bombay High Court (HC) ruling that had permitted lender banks to continue proceedings against Ambani.

While dismissing Mr Ambani’s petitions, the apex court noted that the matter is already pending before a single-judge bench of the Bombay HC. It allowed Mr Ambani to pursue his challenge against show-cause notices issued by banks but urged the High Court to dispose the case swiftly.

The Court also clarified that observations made by the High Court’s division bench while lifting interim protection would not influence the final outcome of the pending proceedings.

The case centres on attempts by a consortium of banks—including Bank of Baroda (BoB), IDBI Bank and Indian Overseas Bank (IOB)—to categorise certain loan accounts of Reliance Communications and related entities as fraud under Reserve Bank of India’s (RBI's) regulatory framework.

Anil Ambani had earlier secured interim relief from a single-judge bench of the High Court in 2025, which restrained banks from taking coercive action based on a forensic audit report. However, that protection was later withdrawn by a division bench earlier this year, prompting Ambani to approach the Supreme Court.

During the hearing, the bench indicated reluctance to override the commercial judgment of lenders. It observed that financial institutions are best placed to decide matters concerning their funds and the agencies they engage for audits.

The Court also declined to accept objections raised by Mr Ambani regarding the credibility of the forensic audit conducted by BDO India LLP in 2020, which forms the basis of the banks’ action.

Senior advocate Kapil Sibal, appearing for Mr Ambani, argued that branding an account as fraudulent carries severe consequences, effectively crippling business operations and access to credit. He contended that such a determination must be based on a valid audit conducted by a qualified statutory auditor.

Mr Ambani’s legal team further questioned the legitimacy of the forensic report, claiming it did not meet regulatory standards and lacked proper authorisation.

However, solicitor general Tushar Mehta, representing the banks, maintained that the audit had been conducted by a reputed professional firm through a proper process and that findings of fund diversion were already on record.

The Supreme Court noted that the case involves allegations of diversion and siphoning of public funds, which are currently under investigation. It emphasised that such issues require detailed examination at the appropriate forum rather than intervention at the apex court level.

Mr Ambani also indicated before the Court his willingness to explore a settlement with the banks. While the court recorded this submission, it did not express any opinion on the proposal.

The dispute stems from a forensic audit report prepared in 2020 that flagged irregularities in loans extended to Reliance Communications and its group entities. The banks relied on this report to initiate fraud classification proceedings.

A key point of contention has been whether the audit complied with applicable regulatory norms, particularly in light of RBI’s 2024 master directions.

The High Court’s division bench had earlier ruled that the 2024 norms could not be applied retrospectively to invalidate actions taken under earlier regulatory frameworks.

With the Supreme Court declining to intervene, the focus now shifts back to the Bombay High Court, where the single-judge bench will examine the merits of Mr Ambani’s challenge to the show-cause notices.