[ad_1]
Former State Bank of India (SBI) chairman Pratip Chaudhuri’s arrest in connection with an alleged loan scam case has sent shockwaves across the public sector banking space, leaving many top bankers in disbelief.
Chaudhuri, 68, was arrested by Rajasthan Police from his home in Delhi on Sunday after a complaint was filed against him for the alleged sale of a non-performing asset (NPA) to an asset reconstruction company (ARC) at a low value.
Following the arrest, he was taken to Jaisalmer, where he remains in judicial custody as his bail application was rejected by the local magistrate.
The sudden arrest of the former top banker without any formal summons or notice in connection with a decade-old alleged NPA loan sale case has left the banking industry baffled, reigniting fears of being criminally implicated in situations where loans given to businesses or individuals turn sour.
THE CASE & PARTIES INVOLVED
The case in which Pratip Chaudhuri has been arrested is related to a Jaisalmer hotel project, Garh Rajwada, financed by SBI. He was arrested on the basis of a protest petition filed by former directors of Hotel Gaudavan the group in charge of the hotel project.
Official records indicate that Hotel Gaudavan (the promoter group) was established on October 6, 1986 and its address is registered as Fort Rajwada in Jaisalmer. It may be noted that Fort Rajwada is a luxury hotel.
The group had taken a loan worth Rs 24 crore from SBI in 2008 for the construction of Garh Rajwada, but the project remained incomplete and a key promoter passed away in April 2010. The loan then became a NPA.
After many failed attempts at recovering the amount or resuscitating the incomplete project, SBI assigned the NPA to Alchemist Asset Reconstruction Company (AARC) Limited in March 2014. The asset was later acquired by an NBFC in 2017.
One important point to note here is that Pratip Chaudhuri retired as SBI chairman after a 2-year-tenure on September 30, 2013. In October 2014, he joined the board of Alchemist ARC.
It is worth mentioning that the borrower (directors of Hotel Gaudavan) had filed an FIR with the state police against the alleged sale of the NPA to the ARC. It had also filed a protest petition before the Chief Judicial Magistrate (CJM) court without making SBI a party to the case. The promoter group, however, named all the directors of Alchemist ARC in the case including Pratip Chaudhuri.
The sudden police action has drawn sharp criticism from veterans of the banking industry.
WHAT POLICE SAID SO FAR?
It still remains unclear whether Pratip Chaudhuri was arrested for his role as SBI Chairman for financing the loan to the promoter group or because he joined the board member of Alchemist ARC that took over the NPA.
The main allegation against Chaudhuri is that SBI had “sold” a property valued much higher for a paltry sum, roughly Rs 25 crore, after seizing them in connection with the loan default.
So far, it has been confirmed that a police team under the directions of Jaisalmer superintendent of police (SP) Ajay Singh arrested Chaudhuri from his residence in the national capital.
He has been accused under Section 420 (Cheating and dishonestly inducing delivery of property), 409 (criminal breach of trust by public servant, or by banker, merchant, or agent), and 120B (criminal conspiracy) in the case filed at the Sadar police station in Jaisalmer.
Additional SP Narendra Choudhury told the Indian Express that following the default by the promoter group, the “highest levels of SBI” decided to sell the five-star property worth around Rs 200 crore for just Rs 25 crore.
“Thus, that particular group (Alchemist ARC) gained a profit of Rs 175 crore,” he told the publication. He acknowledged that procedure was followed but added that the intention was “mala fide”.
SBI’S OFFERS ITS SIDE OF THE STORY
The State Bank of India (SBI) has come out with a strong statement after Pratip Chaudhuri’s arrest. The bank issued a clarification on Monday, saying that the assets seized in connection with the default were sold in accordance with due process in March 2014.
“All due processes were followed while making the said sale to the ARC,” SBI said. The bank also mentioned that the NPA sale was completed after Chaudhuri retired in September 2013.
The country’s largest public lender added that various steps were taken by the bank for the completion of the project as well as the recovery of the bank’s dues before the decision was finally taken to assign the NPA to the ARC.
“Hence, as part of the recovery efforts, the dues were assigned to an ARC in March 2014,” the bank said in the statement. It added that the sale to the ARC was done through a “laid-down process” as per the policy of SBI.
“We further understand that the borrower was subjected to IBC (Insolvency and Bankruptcy Code) process by the said ARC and the asset has been acquired by an NBFC (non-banking financial company) in December 2017, again through due process under the orders of NCLT (National Company Law Tribunal), Delhi,” SBI said.
The bank also mentioned in its statement that the FIR filed by the borrower with the state police did not mention it despite the case involving its loan account. “It transpires now that the borrower had initially filed an FIR with the state police against the sale of assets to ARC. It appears from the copies of the proceedings now accessed by us that the court does not appear to have been briefed correctly on the sequence of events. In as much as SBI was not a party to this case, there was no occasion for the views of SBI being heard as part of the proceedings,” SBI said.
The bank reiterated that it had followed due process and offered to cooperate with law enforcement and judicial authorities, and would provide further information if required.
ALCHEMIST ARC REACTS
Alchemist ARC has also released a statement after the arrest of Pratip Chaudhuri. It criticised Hotel Gaudavan for repeatedly using legal machinery to “evade laws”.
The ARC accused the group of “working towards harassing and defaming the board of AARC”. The ARC has also termed the arrest of Pratip Chaudhuri as “bizarre”.
It went on to say that the Supreme Court has previously quashed an FIR registered by the borrower in Jaipur and upheld the IBC process followed by AARC for the resolution of Hotel Gaudavan’s assets.
AARC added that SBI had only assigned the loans and no sale of property was involved. “The allegations by the Hotel Gaudavan Private Limited are an act of their notorious nature,” it added.
TOP BANKERS SHOCKED, EXPRESS DISPLEASURE
The episode has baffled some top bankers in the country who have spoken out against the sudden arrest of Pratip Chaudhuri.
Former SBI deputy managing director Sunil Srivastava expressed displeasure over the arrest on Twitter.
“Frankly, without notice and without summons, how can police from another state arrest someone in Delhi, where is the due process of law?” he asked.
“Absolutely pathetic, is the system being gamed again by defaulters despite all efforts by Modi govt, time for overhaul of judicial processes to improve transparency and introduce accountability,” Srivastava added.
Former SBI chairman Rajnish Kumar also expressed displeasure over Pratip Chaudhuri’s sudden arrest, calling it extremely unfortunate and a “case of highhandedness”.
Kumar added that the case seemed to be “highly motivated” and that there seemed to be an “error of judgment”.
Indian Banks’ Association (IBA) chief executive Sunil Mehta told Business Standard newspaper that the lending and sale of assets are financial decisions, and they are executed by adhering to strict due diligence norms.
“Such arrests are a grave matter and the association will raise the issue with the Department of Financial Services and Rajasthan government,” he said. “The management committee of IBA will also seek redressal,” he told the publication.
Meanwhile, FICCI president Uday Shankar told CNBC-TV18 that Chaudhuri’s arrest is an “alarming development”.
Shankar said the move could “seriously undermine the resolve of the members of the banking fraternity to move ahead with the recovery process for loans where there has been a default.
The fact that the arrest took place on a day when the Ministry of Finance issued detailed guidelines to state-owned banks for adopting uniform staff accountability framework for NPA accounts up to Rs 50 crore came as a bigger shock to bankers.
This is because the framework has been designed to protect bankers in case bonafide business decisions go wrong and lead to NPAs.
[ad_2]
Source link
