Reliance Communications Limited has received notification from Canara Bank regarding the classification of credit facilities extended to its subsidiary Reliance Telecom Limited as "fraud", with the bank ordering reporting to the Reserve Bank of India for inclusion in the Central Fraud Registry. The disclosure was made on March 03, 2026, pursuant to regulatory requirements under SEBI Listing Regulations.

Fraud Classification Details

Canara Bank's decision stems from a comprehensive forensic audit conducted by BDO India LLP covering the period from April 01, 2013 to March 31, 2017. The audit was commissioned by the lead bank, State Bank of India, and its final report submitted on October 15, 2020 revealed significant irregularities in fund utilization.

Key Audit Findings

The forensic audit uncovered multiple irregularities in fund utilization across RCOM group companies. The investigation revealed that Rs. 6,265.85 crores obtained from banks were utilized for repayment of other bank loans, while Rs. 5,501.56 crores were used for payments to related and connected parties, deviating from sanctioned purposes.

Significant inter-company transactions were identified, including RCOM transferring Rs. 783.77 crores to RTL and Rs. 1,435.24 crores to RITL from bank loans. Additionally, RITL discounted bills worth Rs. 8,514.70 crores for RCOM and Rs. 1,041.42 crores for RTL, with funds primarily used for connected party payments.

Corporate Insolvency Resolution Process

Both Reliance Communications and Reliance Telecom Limited are currently undergoing corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016. Resolution plans for both companies have been approved by their respective committees of creditors and are presently awaiting approval from the National Company Law Tribunal, Mumbai Bench.

Bank's Response to Legal Challenges

The Resolution Professional had contested the fraud classification, arguing that the moratorium under Section 14(1)(a) of the Code prohibits such identification during ongoing CIRP. However, Canara Bank clarified that fraud classification constitutes a regulatory action under RBI guidelines and is not barred by the moratorium provisions.

The bank referenced the Mumbai Bench NCLT ruling in Rolta India RP vs. Bank of India dated July 14, 2025, which held that banks can classify corporate debtor accounts as fraudulent even during CIRP, as such classification under RBI's Master Direction on Frauds 2016 represents regulatory action not prohibited by Section 14 of IBC.

Impact Assessment

The company has indicated that the credit facilities in question pertain to the period prior to the CIRP of both RCOM and RTL. Under the Insolvency and Bankruptcy Code, these matters are required to be resolved as part of the resolution plan or in liquidation proceedings. The company noted that Section 32A of the Code provides protection against liability for offences committed prior to CIRP commencement, upon approval of the resolution plan by NCLT.

Reliance Communications has disclosed that the Central Bureau of Investigation conducted a search and seizure operation at its office premises on February 26, 2026. The telecommunications company, currently under corporate insolvency resolution process, made the disclosure in compliance with regulatory requirements.

Search Operation Details

The CBI officials conducted the search operation at the company's office premises located at B Block and H Block, Dhirubhai Ambani Knowledge City, Navi Mumbai. During the operation, officials seized several important documents from the company's premises.

Legal Framework

The search operation was conducted under Section 185 of the Bharatiya Nagarik Suraksha Sanhita, 2023. The CBI took possession of original minutes of board meetings for both Reliance Communications and its wholly owned subsidiary Reliance Telecom Limited, along with various financial, secretarial and banking documents.

Company's Assessment

Reliance Communications stated that the search and seizure operation is not expected to have any impact on the company's financials or operations. The company emphasized that it continues to operate its business in the normal course despite the investigation.

Corporate Insolvency Status

The company remains under corporate insolvency resolution process pursuant to the Insolvency and Bankruptcy Code, 2016. Since June 28, 2019, the company's affairs, business and assets are being managed by Resolution Professional Mr. Anish Niranjan Nanavaty, appointed by the National Company Law Tribunal, Mumbai Bench.

The company noted that it is subject to protections available under the provisions of the Insolvency and Bankruptcy Code during the ongoing resolution process.