Canara Bank on Thursday informed the Bombay High Court that it has withdrawn its earlier order classifying industrialist Anil Ambani’s loan account as fraudulent, while seeking liberty to re-examine the issue in the future.

The bank’s move came during the hearing of a petition filed by Ambani challenging the classification.

Represented by advocates Nishit Dhruva and Niyati Merchant of MDP Legal, the bank made the submission before a bench of Justices Revati Mohite-Dere and Dr Neela Gokhale. The court then disposed of Ambani’s petition while allowing the bank the liberty it sought.

Ambani had moved court after Canara Bank reportedly marked his account as fraudulent on the grounds that funds sanctioned for capital expenditure and debt repayment had been diverted for intercompany transactions.

The classification was related to a Rs 1,050 crore loan granted in 2017 to Ambani’s now-bankrupt telecom firm, Reliance Communications, and its subsidiary.

In an earlier hearing in February, the bench had noted that, as per the Reserve Bank of India’s master circular, banks must follow principles of natural justice before declaring an account fraudulent. The court observed that Canara Bank had failed to provide Ambani with a hearing.

While the bank maintained that it had issued a show cause notice, Ambani’s legal team argued that no such notice was received, as the company was undergoing insolvency proceedings at the time.

The bench had also stayed Canara Bank’s classification order and issued a notice to the RBI, questioning its inaction against banks that bypass due process before labelling accounts fraudulent.

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