Delhi HC directs Union Bank of India, IOB for maintaining status quo in classification of accounts matter of RCOM and its subsidiary as fraudulent

Delhi HC directs Union Bank of India, IOB for maintaining status quo in classification of accounts matter of RCOM and its subsidiary as fraudulent

The Delhi High Court (HC) gives directions to the Union Bank of India and Indian Overseas Bank (Banks) for maintaining the status quo in a matter regarding the classification of accounts of Reliance Communication Ltd. (RCOM) and its subsidiary, Reliance Telecom Ltd. (RTL) as fraudulent

Mr. Punit Garg & Another (petitioners) filed a writ petition before the Delhi High Court (HC) against the Union Bank of India and Others (respondents). In the said petition, the petitioner challenged the vires of the Circular RBI/DBS/2016-17/DBS.CO.CFMC.BC.No.1/23.04.001/2016- 17 dated 1 July 2017 updated as on 3 July 2017 issued by the Reserve Bank of India (RBI).

According to the reports, the Union Bank of India (UBI), the State Bank of India (SBI), and Indian Overseas Bank (IOB) had marked RCOM's account as fraudulent. RTL is a 100% subsidiary of RCOM. The SBI and UBI had also classified RTL's accounts as fraudulent.

The matter went to the National Company Law Tribunal, (NCLT) Mumbai whereby in the first week of December NCLT gave approval to the Reliance Infratel's Resolution Plan. The Reliance Jio's group company Reliance Digital Platform is the successful Resolution Applicant for Reliance Infratel Ltd. The Lenders would get Rs. 4,400 Crores from Reliance Digital.

The writ petition was filed before the HC and the matter was listed before the Single Judge bench of Justice Subramonium Prasad. He passed an order to the banks for maintaining the status quo till 13 January 2021.

The HC further clarified that the Centre is free to issue a show-cause notice (SCN) to the petitioner. The Centre is also free to take any steps/investigation/file any complaint proceedings against the petitioners and the order passed by the HC shall not impact the discretion of the Centre to proceed against the petition. It may declare the accounts of the two companies as fraudulent accounts.