Bombay High Court Upholds Fraud Tag On Former Realme Zonal Distributor, Rejects Ex-Director's Plea

The Bombay High Court on Thursday dismissed a writ petition filed by Anil Khemani, former director of Eagle Electronics India Pvt Ltd (EEPL), a Realme zonal distributor.

Khemani had challenged Axis Bank's show cause notice and its decision declaring the company's account as "fraud".

A division bench of Justices B.P. Colabawalla and Firdosh P. Pooniwalla upheld the bank's October 16, 2025 order. The Court found no violation of the principles of natural justice and held that the fraud classification order contained adequate reasons.

"On a reading of Schedule I, Part B, of the Order, which contains the key findings of the Transaction Audit Report, it is very clear that the Order dated 16th October 2025 contains detailed reasons as to why Respondent No.2 should be declared as fraud. Hence, we are clearly of the view that the impugned Order cannot, by any stretch of the imagination, be termed as unreasoned. Hence, this grievance of the Petitioners is wholly unfounded, and therefore rejected.", the Court said. 

The dispute arose after Axis Bank took over credit facilities of ₹23.01 crore granted to EEPL from SBI on June 22, 2020. The company allegedly opened an undisclosed account with Nashik Merchant Co-operative Bank on November 17, 2022, defaulted on its loans, and was admitted into the Corporate Insolvency Resolution Process (CIRP) on March 3, 2024.

On May 18, 2024, the bank appointed JKJS & Company LLP as transaction auditors, whose draft report was shared with the petitioners on September 10, 2024. The petitioners argued that the fraud order was unreasoned and passed in breach of natural justice as they lacked access to company records during CIRP.

Rejecting the petitioners' contention, the Court held that the they had been supplied the draft audit report, granted access to the company's office and given opportunities before the Committee of Creditors to respond to the audit findings.

The Court further noted that despite undertaking to furnish the Tally data by November 20, 2024, the petitioners failed to do so, following which the final transaction audit report was submitted on November 26, 2024 and the account was later tagged as a Red Flagged Account.

"However, Petitioner No. 1 failed to provide the Tally data by 20th November 2024. In these circumstances, the final Transaction Audit Report was submitted by the Auditors on 26th November 2024. Respondent No.2's account was tagged as Red Flagged Account based on the Transaction Audit Report."

Holding that the petitioners were aware of the allegations well before the show cause notice dated September 6, 2025 and that Axis Bank was justified in refusing further time to reply, the Court found no violation of natural justice.

Accordingly, the Court dismissed the writ petition.

For Petitioners: Nishant Chotani i/b. Neha Shah, Advocates 

For Respondents: Satchit Bhogle a/w. Rajendra Shinde, Anet Johnson i/b. Svarniti and Associates