Case Note & Summary
This matter concerned three suits filed by the plaintiff, Anil D. Ambani, against Indian Overseas Bank, IDBI Bank, Bank of Baroda, and others, along with interim applications seeking injunctive relief under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, 1908, and permission under Order II Rule 2 CPC. The core dispute arose from show cause notices issued by the banks under the Reserve Bank of India's Master Directions on Fraud Risk Management, 2024, which were based on a Forensic Audit Report dated 15 October 2020 prepared by BDO LLP. The plaintiff, formerly a Non-Executive Director of Reliance Communications Limited and associated entities, contended that the Forensic Audit Report was fundamentally flawed because BDO LLP was not a firm of Chartered Accountants registered with the Institute of Chartered Accountants of India and its signatory was not a Chartered Accountant holding a Certificate of Practice. According to the plaintiff, the 2024 RBI Master Directions, particularly Clause 4.1 read with Footnote 14, mandated that external auditors must be qualified under relevant statutes, and the Chartered Accountants Act, 1949 restricted audit practice to ICAI-registered Chartered Accountants. The plaintiff argued that the report lacking a Unique Document Identification Number and bearing the signature of a non-CA rendered it invalid, and consequently, the show cause notices based solely on that report could not be sustained. The banks defended the appointment, citing BDO LLP's empanelment with the Indian Banks' Association and SEBI. The court heard elaborate submissions from senior counsel for both sides. However, the judgment excerpt ends during the recording of arguments, and the final decision on interim relief is not captured in the provided text.
Issue of Consideration
Whether a Forensic Audit Report prepared by an auditor who is not a Chartered Accountant and not registered with ICAI can form the basis of a show cause notice under the 2024 RBI Master Directions?
Case Details
2025 LawText (BOM) (12) 171
Suit (L) No. 35923 of 2025 along with Suit (L) No. 37573 of 2025 and Suit (L) No. 37862 of 2025
Mr. Gaurav Joshi, Mr. Ashish Kamat, Mr. Mayur Khandeparkar for Plaintiff; Mr. Zal Andhyarujina, Mr. Zarir Bharucha, Mr. Kevic Setalvad, Mr. Kunal Dwarkadas for Defendants
Indian Overseas Bank and Ors.; IDBI Bank Ltd. and Ors.; Bank of Baroda and Ors.
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Nature of Litigation
Civil suits filed by Anil D. Ambani seeking declaration and injunction against banks and audit firm concerning show cause notices issued under RBI Master Directions on the basis of an allegedly invalid Forensic Audit Report.
Remedy Sought
Interim injunction restraining banks from taking any action pursuant to the show cause notices and a declaration that the Forensic Audit Report is invalid and cannot be relied upon.
Filing Reason
Banks issued show cause notices under the 2024 RBI Master Directions premised solely on a Forensic Audit Report prepared by BDO LLP, which the plaintiff contends is invalid because the auditor is not a Chartered Accountant as required by the Chartered Accountants Act, 1949 and RBI directions.
Issues
Whether BDO LLP and its signatory were statutorily qualified to conduct the forensic audit under the 2024 RBI Master Directions and the Chartered Accountants Act, 1949.
Whether the show cause notices issued on the basis of such Forensic Audit Report are void and liable to be set aside.
Whether the plaintiff is entitled to interim injunction restraining the banks from proceeding further on the basis of the show cause notices.
Submissions/Arguments
Plaintiff submitted that he was a Non-Executive Director of Reliance Communications Limited until 2019 and the companies operated as a Single Economic Unit.
The 2016 RBI Master Directions required a Forensic Audit before classifying a person as fraud, and the banks appointed BDO LLP as Forensic Auditor in 2019.
BDO LLP submitted the Forensic Audit Report on 15.10.2020 and later confirmed no conclusion of fraud against the plaintiff.
The 2024 RBI Master Directions superseded the 2016 directions and mandated that the external auditor must be qualified under relevant statutes.
BDO LLP is not registered with the Institute of Chartered Accountants of India, and its signatory is not a Chartered Accountant and does not hold a Certificate of Practice, as confirmed by an RTI reply.
Sections 2(b), 2(e) and 6 of the Chartered Accountants Act, 1949 restrict audit practice to ICAI-registered CAs with valid Certificate of Practice, thus the Forensic Audit Report is invalid.
The report lacks a Unique Document Identification Number, which is mandatory for attestation functions.
The show cause notice issued by Indian Overseas Bank on 02.12.2024 is solely based on the invalid report and cannot be sustained.
The banks' reliance on BDO LLP's empanelment with the Indian Banks' Association or SEBI is misplaced as these bodies lack statutory authority to override the RBI directions.
Judgment Excerpts
Clause 4.1 readwith Footnote No.14 of the 2024 RBI Master Directions, clarify and mandate that the Auditor qualified to conduct an audit under 'relevant statutes' be appointed as External Auditor.
Defendant No.2 – BDO LLP is not registered with the ICAI.
The Report does not bear the signature of a Chartered Accountant Partner who has acted in preparation of the Report as mandated by law.
Defendant No.2 has described itself as an 'accounting consultant firm' and not an Audit firm which is a primary requirement under the 2024 RBI Master Directions.
Procedural History
In June 2017, the Joint Lenders' Forum considered appointing an audit firm for Forensic Review of RCOM, RTL and RITL. In September 2017, Ericsson Indian Pvt. Ltd. filed a company petition against RCOM. On 15.05.2018, RCOM was admitted into Corporate Insolvency Resolution Process by NCLT. On 07.05.2019, SBI as lead lender appointed BDO LLP as Forensic Auditor. BDO LLP submitted the Forensic Audit Report on 15.10.2020. The plaintiff sought clarification from BDO LLP on 19.01.2021, and BDO LLP replied on 03.02.2021 confirming no conclusion of fraud. On 15.07.2024, RBI issued the 2024 Master Directions superseding the 2016 directions. On 02.12.2024, Indian Overseas Bank issued a show cause notice based on the 2020 report. On 12.12.2024, the plaintiff requested a copy of the report, which was supplied without annexures on 18.01.2025. The plaintiff again sought complete documents on 10.03.2025. On 10.09.2025, a personal hearing was scheduled for 09.10.2025. An RTI application filed on 29.09.2025 confirmed on 24.10.2025 that BDO LLP was not registered with ICAI. The plaintiff thereafter filed the present suits and interim applications.
Acts & Sections
- Chartered Accountants Act, 1949: 2(b), 2(e), 6
- Code of Civil Procedure, 1908: Order II Rule 2, Order XXXIX Rule 1 & 2
- Master Directions on Fraud – Classification and Reporting by Commercial Banks and select FIs, 2016: Clause 8.9.4
- Master Directions on Fraud Risk Management in Commercial Banks (including Regional Rural Banks) and All India Financial Institutions Directions, 2024: Clause 4.1, Clause 10, Footnote 14
