The Delhi High Court set aside Union Bank of India’s decision to label a company linked to Jai Anmol Ambani as fraudulent, citing violation of natural justice. The Court held that no valid show cause notice was served and allowed the bank to restart the process afresh as per law.
The Delhi High Court on Friday set aside Union Bank of India’s decision to declare the bank account of a company owned by Jai Anmol Ambani, son of industrialist Anil Ambani, as fraudulent.
Justice Jyoti Singh passed the order while hearing a petition filed by Jai Anmol Ambani, who challenged the bank’s action on the ground that it was taken without following the basic principles of natural justice.
Ambani argued that Union Bank of India declared his company’s account as fraud without issuing any prior show cause notice or giving him a chance to explain his position.
During the hearing, Ambani relied on the Supreme Court judgment in State Bank of India v Rajesh Agarwal, where the apex court had clearly held that borrowers must be given advance notice and an opportunity to respond before their accounts are classified as fraudulent. Ambani submitted that Union Bank ignored this binding legal requirement.
Senior Advocate Rajiv Nayar, appearing for Jai Anmol Ambani, pointed out that even as per Union Bank’s own affidavit, the show cause notice was sent to an address that the company had already vacated in September 2020.
He argued that this clearly showed that no valid notice was ever served on Ambani before taking the serious step of branding the account as fraud.
After examining the facts and records, the Delhi High Court agreed with Ambani’s argument.
The Court observed that sending a notice to an old address where the company was no longer operating effectively meant that no notice was served at all. The Court concluded that the bank had violated the principles laid down by the Supreme Court.
The Court ordered,
“This Court is of the view that indeed a show cause notice was never served before making the declaration as fraud. Accordingly in light of the judgment…., the impugned classification and declaration are quashed,”
However, the Court also made it clear that the decision does not permanently stop the bank from taking action. Justice Jyoti Singh clarified that Union Bank of India is free to issue a fresh show cause notice and proceed in accordance with law.
The Court directed that if a fresh notice is issued, the bank must supply all relevant material and documents to Jai Anmol Ambani so that he can file a proper reply. Only after considering his response can the bank pass a fresh order.
The case has gained attention in light of ongoing investigations against Anil Ambani group companies. The Central Bureau of Investigation (CBI) has registered cases against companies linked to the Anil Ambani group, alleging fraud of nearly Rs 14,853 crore.
According to the CBI, Jai Anmol Ambani cheated Union Bank of India and caused a loss of about ₹228 crore to the public sector bank.
The agency has alleged that Reliance Home Finance Ltd (RHFL), where Jai Anmol Ambani served as a director, borrowed large amounts of money but failed to repay the loans as agreed.
As per reports, a forensic audit conducted in the matter allegedly found that loan funds were diverted and misused instead of being used for their approved purposes.
Due to this, the loan account reportedly turned into a non-performing asset (NPA). Union Bank has claimed that it suffered a wrongful loss of approximately ₹228.06 crore.
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After classifying the account as fraudulent, Union Bank lodged a complaint with the CBI accusing Jai Anmol Ambani and others of criminal conspiracy, cheating and misconduct. The criminal investigation by the CBI continues independently of the High Court’s decision on the bank’s fraud classification process.
Senior Advocate Rajiv Nayar represented Jai Anmol Ambani in the matter before the Delhi High Court. The petition was filed through advocates Rishi Agrawala and Tejasvi Chaudhry of Agarwal Law Associates.
Case Title:
Anmol Ambani v Union Bank of India.
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