The Bombay High Court has overturned the Bank of India's decision to classify Kishore and Rakesh Biyani as fraudsters. The court ruled the bank failed to provide necessary reasoning and violated RBI guidelines, ordering the removal of their names from the Central Fraud Registry.
The Bombay High Court has provided relief to Kishore and Rakesh Biyani, promoters of Future Lifestyle Fashions Ltd. (FLFL), by quashing the 'fraud' classification previously issued by the Bank of India. In a ruling delivered by a division bench, the court determined that the bank's action lacked the required reasoning and failed to comply with the Reserve Bank of India's (RBI) Master Directions on fraud.
The dispute originated from the Bank of India's order on June 21, 2025, which labeled the accounts associated with the promoters as fraudulent after the company’s loans turned into non-performing assets. The Biyani brothers had challenged this classification, arguing that the bank simply echoed findings from a forensic audit without conducting an independent investigation or addressing responses provided to show-cause notices.
Court Observations on RBI Compliance
The court emphasized that classifying an individual or entity as a fraudster has significant consequences and requires a transparent, well-reasoned process. The bench noted that the bank’s order did not adequately justify the fraud tag, particularly after the promoters pointed out that a forensic audit addendum from another lender had previously cleared them regarding certain related-party transactions. By not addressing these submissions, the bank failed to adhere to the procedural fairness mandated by the RBI's framework.
Following this decision, the Bank of India is now required to remove the names of Kishore and Rakesh Biyani from the Central Fraud Registry. This registry acts as a database for banks to track fraudulent accounts, and being listed can severely restrict an individual's or company's ability to access credit or participate in future financial ventures.
Context of Future Lifestyle Fashions
Future Lifestyle Fashions Ltd. has been at the center of financial and legal scrutiny following a broader downturn in the retail business and the subsequent debt defaults within the group. The 'fraud' tag was a severe escalation in the bank's effort to recover dues. While this court ruling addresses the specific classification of the promoters, the company itself remains under significant financial strain. The legal struggle highlights the importance of the 'Right to be Heard' in banking procedures, as the court specifically cited the bank's failure to consider replies to show-cause notices.
Investors should note that while this legal victory removes a major regulatory stain on the promoters, it does not resolve the underlying financial issues or the debt repayment obligations facing Future Lifestyle Fashions Ltd. The next update will involve the implementation of the court’s order by the bank and whether the bank chooses to appeal the ruling in a higher court or initiates fresh, more detailed proceedings in line with the RBI's guidelines.