The court determined that a Forensic Audit Report must be authored by a qualified Chartered Accountant, as required by statutory provisions, to constitute valid basis for fraud classification by banks.

JUDGMENT :

MILIND N. JADHAV, J.

1. Heard Mr. Joshi and Mr. Kamat, learned Senior Advocates and Mr. Khandeparkar, learned Advocate for Plaintiff / Applicant, Mr. Andhyarujina, Mr. Setalvad and Mr. Bharucha, learned Senior Advocates for Defendant No.1 - Bank and Mr. Dwarkadas, learned Advocate for Defendant Nos.2 and 3 in all three (3) suits.

2. In Indian Overseas Bank Suit (L) No. 35923 of 2025, Interim Application (L) No. 35925 of 2025 is filed by Plaintiff seeking interim reliefs under Order XXXIX Rule 1 & 2 of Civil Procedure Code, 1908 (for short ‘CPC’) and Interim Application (L) No.35924 of 2025 is filed seeking order under Order II Rule 2 of CPC. In IDBI Bank Ltd. Suit (L) No. 37573 of 2025, Interim Application (L) No. 37575 of 2025 is filed by Plaintiff seeking interim reliefs under Order XXXIX Rule 1 & 2 of CPC and Interim Application (L) No. 37574 of 2024 is filed seeking order under Order II Rule 2 of CPC. In Bank of Baroda Suit (L) No. 37862 of 2025, Interim Application (L) No. 37865 of 2025 is filed by Plaintiff seeking interim reliefs under Order XXXIX Rule 1 & 2 of CPC and Interim Application (L) No. 37868 of 2025 is filed seeking order under Order II Rule 2 of CPC. Interim Application (L) No.35925 of 2025, Interim Application (L) No.37575 of 2025 and Interim Application (L) No.37865 of 2025 and are taken up for hearing for grant of interim reliefs. Pleadings are completed.

2.1. Mr. Andhyarujina, Mr. Setalvad and Mr. Bharucha, learned Senior Advocates appearing for the Banks and Mr. Dwarkadas, learned Advocate for Defendant Nos.2 and 3 oppose interim reliefs.

3. Mr. Joshi, learned Senior Advocate for Plaintiff would submit that Plaintiff was the Non-Executive Director of Reliance Communications Limited (for short “RCOM”) from its inception till the year 2019. He would submit that RCOM, Reliance Telecom Limited (for short “RTL”) and Reliance Infratel Limited (for short “RITL”) together with its 98 subsidiaries operated as a Single Economic Unit.

3.1. He would submit that on 01.07.2016, Reserve Bank of India issued Master Directions on Fraud – Classification and Reporting by Commercial Banks and select FIs (for short “2016 RBI Master Directions”) and in terms of Clause 8.9.4 thereof a Forensic Audit was required to be carried out before classifying a person as a “Fraud”.

3.2. He would submit that in June 2017, Joint Lenders’ Forum (for short “JLF”) of which Defendant No.1 – Bank is a Member considered appointment of an Audit firm for Forensic Review of RCOM, RTL and RITL. He would submit that Banks were primarily interested in recovery of their dues through sale of assets of the said Companies.

3.3. He would submit that in September 2017, Ericsson Indian Pvt. Ltd. filed Company Petition against RCOM. He would submit that on 15.05.2018 RCOM was admitted into Corporate Insolvency Resolution Process (for short “CIRP”) by National Company Law Tribunal and the Board of Directors stood superseded by the Resolution Professional.

3.4. He would submit that, in the meanwhile, on 07.05.2019, State Bank of India (for short “SBI”) as the lead lender of the consortium appointed Defendant No.2 – BDO LLP as Forensic Auditor. He would submit that on 15.10.2020, Defendant No.2 – BDO LLP submitted Forensic Audit Report (for short “FAR”) to SBI. He would submit that on 19.01.2021, Plaintiff’s erstwhile Advocates addressed letter to Defendant No.2 – BDO LLP seeking clarification on the FAR. He would submit that on 03.02.2021, Defendant No.2 – BDO LLP through its Advocates replied and confirmed that no conclusion of fraud or breach of trust was arrived at in respect t