The Bombay High Court has annulled Bank of India’s decision to label the accounts of Kishore and Rakesh Biyani, key figures behind Future Lifestyle Fashions Ltd (FLFL), as ‘fraud’ in the case of Kishore Biyani & Anr v. Bank of India & Anr. A judicial panel comprising Justices BP Colabawalla and Firdosh Pooniwalla determined that the bank’s action lacked adequate reasoning and violated the Reserve Bank of India’s 2024 Fraud Master Directions.
Background of the Case
The legal verdict came after the Biyani brothers contested Bank of India’s decision dated June 21, 2025, which classified Future Lifestyle’s account, along with their own, as ‘fraud’ under the RBI’s 2024 Fraud Master Directions on Fraud Risk Management. The brothers also challenged the initial show cause notice and a forensic audit report dated August 7, 2024, requesting the court to prevent the bank from acting on these documents, including any reports filed with the Central Fraud Registry.
Arguments and Judgement
Future Lifestyle Fashions Ltd had taken credit facilities from Bank of India, with Kishore Biyani as a guarantor. The account was subsequently marked as a non-performing asset, prompting the bank to conduct a forensic audit and issue a show cause notice, which eventually resulted in the fraud designation. The Biyanis argued that the bank’s decision was primarily based on the forensic audit report, which lacked independent reasoning. They emphasized that FLFL’s managing director had provided a comprehensive response to the show cause notice, which the bank failed to address in its order.
Additionally, the forensic audit report was deemed inconclusive and included an addendum from Bank of Baroda that exonerated the Biyanis concerning related-party transactions. The petitioners also accused Bank of India of failing to perform an independent internal investigation as mandated by the Master Directions.
In contrast, Bank of India contended that the promoters had neither submitted a response nor adopted the Managing Director’s reply, and thus could not rely on it. The bank argued that the forensic audit report incorporated sufficient reasoning, which justified the fraud classification even if not explicitly restated in the order.
More Read
The Court dismissed the bank’s defense, ruling that the Fraud Master Directions necessitate a well-reasoned order when designating an account as fraud. The Court highlighted that the bank’s order lacked detailed reasoning, especially given the unanswered reply from the Managing Director. Consequently, the Court nullified the bank’s order, deeming it unreasonable and inconsistent with the RBI guidelines.
Conclusion and Further Directions
The Court ordered Bank of India to remove the Biyanis’ names from the Central Fraud Registry and left the door open for the bank to resume proceedings, provided they strictly comply with the 2024 Fraud Master Directions.
Representing the Biyanis, senior advocate Gaurav Joshi, along with advocates Ankit Lohia, Petrushka Dasgupta, Krishna Baruah, Altamash Qureshi, and Kewal Buddhen from Link Legal, argued the case. For Bank of India, senior advocate Mustafa Doctor and advocates Spenta Kapadia, Ricky Sampat, and Surekha Yadav from MV Kini Law Firm presented their case, while advocates Huzan Bhumgara and Riddhi Badhekar from Desai and Diwanji represented the RBI.
