SBI Labels RCom Loan Account as 'Fraud', Flags Anil Ambani to RBI

State Bank of India has decided to report the loan account in the name of Reliance Communications as ‘fraud’. The public sector lender will also report the name of the company’s erstwhile director Anil Ambani to the Reserve Bank of India, Reliance Communications said in an exchange filing late July 1.

The company is under corporate insolvency resolution process and its affairs, business and assets are being managed by the Resolution Professional Anish Niranjan Nanavaty, with effect from June 28, 2019. The company is protected from the institution or continuation of any suits or proceedings against itself, in light of Section 14(1)(a) of the Insolvency and Bankruptcy Code.

A resolution plan has been approved by the committee of creditors is presently awaiting approval of the Mumbai Bench of the National Company Law Tribunal, the company said. The loan referred to in the SBI’s letter is related to the period prior to the corporate insolvency resolution process.

The company through its legal representatives, however, refuted the allegation and claimed that the bank hasn't responded to them for over a year. In a statement on July 2, the company said the bank has failed to provide all the necessary documents, which has further prevented it from taking necessary action.

"At the outset, our client [Anil D. Ambani] is shocked to receive the ex-parte order of the Fraud Identificantion Number (FIC) of the bank, purportedly classifying the loan account of RCOM as fraud, after almost a year of the Bank not responding to our Client's last communication," Anil Ambani's legal representative said in the statement.

The bank found two transactions as misappropriation of funds and breach of trust. It was found that the company did not use ₹250-crore loan for the purpose it was availed, and the transaction was routed through related companies to conceal the source of fund in order to avoid required regulatory approval in case of external commercial borrowing loans, SBI said in its letter.

The loan sanctioned by Dena Bank in 2017, was availed for the purpose of "short term cash flow mismatch for payment of statutory dues, sundry creditors" but the company paid it to Reliance Communications Infrastructure as Inter-Corporate Deposit. However, management has claimed that later this amount was used to repay ECB installment availed from BNP-Paribas.

Another loan of ₹248 crore, which was sanctioned by IIFCL for the purpose of meeting ongoing capital expenditure, was paid to Reliance Infratel (₹63 crore) and RIEL (₹77 crore) for repayment of loans. These transactions were also routed through its subsidiary Reliance Communications Infrastructure, SBI said.

The bank has also termed some transactions of the company as manipulation of books of accounts through fictitious accounts.