Canara Bank classifies Reliance Communications accounts as ‘fraud’

NEW DELHI: Canara Bank has classified the accounts of Reliance Communications and its subsidiary Reliance Telecom as “fraud”, as disclosed in a BSE filing. However, RCom which is currently under corporate insolvency resolution process, stated that this classification is not anticipated to affect the company.
“This is to inform you that company and its subsidiary Reliance Telecom Limited has received letters from Canara Bank, with subject ‘Classifying the Account as Fraud’, classifying accounts of company and its subsidiary, Reliance Telecom Limited as ‘fraud’,” the filing by RCom stated.
Canara Bank’s letter outlined various reasons for the fraud classification, including improper fund utilisation and routing of loan amounts through the companies to settle liabilities with connected parties.
The letter also cited “intercompany transactions” and the investment of loans in Mutual Funds and Fixed Assets, which were promptly liquidated for payments to various parties.
“On analysing the matter in its entirety, the Competent Authority (Managing Director and CEO) has permitted the matter as ‘Fraud’ as on September 6, 2024 pursuant to which the account has been reported to Reserve Bank of India as fraud on September 18, 2024 by our bank,” Canara Bank’s letter stated.
Meanwhile, the company is seeking legal consultation regarding this development.
“The Company is undergoing corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code, 2016. A resolution plan has been approved by the committee of creditors of the company in accordance with the Code and is presently awaiting approval of the National Company Law Tribunal, Mumbai Bench,” the company said in its statement.
Additionally, the filing mentioned that the credit facilities mentioned in Canara Bank’s letter relate to the period before CIRP and must be resolved within the resolution plan or liquidation process.
“Further, during the CIRP, the company is inter alia protected from, the institution/ continuation of any suits/ proceedings against the company, including the execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority in light of Section 14(1)(a) of the Code,” the filing stated.
The filing additionally mentioned that “…it may be noted that by virtue of the protection made available under Section 32A of the Code, upon the approval of the resolution plan in respect of the Company by the NCLT, the Company shall be deemed to have immunity against any liability for any purported offences committed by the Company prior to the commencement of the CIRP (including any liability which may arise as a result of any unlawful transactions identified in the forensic audit report.”