Former State Bank of India (SBI) chairman Pratip Chaudhuri's arrest regarding an alleged loan scam case has sent shockwaves across the public area 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 offer of a non-performing asset (NPA) to an asset reproduction organization (ARC) at a low worth.
Following the arrest, he was taken to Jaisalmer, where he stays in judicial custody as his bail application was dismissed by the local magistrate.
The abrupt arrest of the former top banker with no proper request or notice regarding 10 years old alleged NPA loan deal case has left the banking industry baffled, reigniting fears of being criminally embroiled in circumstances where loans given to organizations or people turn sour..
THE CASE and PARTIES INVOLVED
The case in which Pratip Chaudhuri has been arrested is identified with a Jaisalmer lodging project, Garh Rajwada, financed by SBI. He was arrested based on a dissent appeal filed by former director of Hotel Gaudavan the gathering accountable for the lodging project.
Official records demonstrate that Hotel Gaudavan (the advertiser bunch) was set up on October 6, 1986 and its location is enrolled as Fort Rajwada in Jaisalmer. It very well might be noticed that Fort Rajwada is a lavish inn.
The group had taken a loan worth Rs 24 crore from SBI in 2008 for the development of Garh Rajwada, yet the venture stayed fragmented and a key advertiser died in April 2010. The loan then, at that point, turned into a NPA.
After many failed attempts at recuperating the sum or reviving the fragmented undertaking, SBI allocated the NPA to Alchemist Asset Reconstruction Company (AARC) Limited in March 2014. The asset was subsequently procured by a NBFC in 2017.
One significant highlight note here is that Pratip Chaudhuri resigned as SBI chairman following a 2-year-residency on September 30, 2013. In October 2014, he joined the leading body of Alchemist ARC.
It is worth focusing on that the borrower directors of Hotel Gaudavan) had filed a FIR with the state police against the alleged sale of the NPA to the ARC. It had likewise filed a dissent appeal before the Chief Judicial Magistrate (CJM) court without making SBI involved with the case. The advertiser bunch, notwithstanding, named every one of the heads of Alchemist ARC for the situation including Pratip Chaudhuri.
The abrupt police activity has drawn sharp analysis from veterans of the banking industry.
WHAT POLICE SAID SO FAR?
It actually stays muddled whether Pratip Chaudhuri was arrested for his job as SBI Chairman for financing the loan to the advertiser bunch or in light of the fact that he joined the board individual from Alchemist ARC that assumed control over the NPA.
The fundamental charge against Chaudhuri is that SBI had "sold" a property esteemed a lot higher for a unimportant aggregate, generally Rs 25 crore, subsequent to holding onto them regarding the loan default.
Up until now, it has been affirmed that a police group under the headings of Jaisalmer administrator of police (SP) Ajay Singh arrested Chaudhuri from his home in the public capital.
He has been charged under Section 420 (Cheating and unscrupulously instigating conveyance of property), 409 (criminal break of trust by community worker, or by financier, shipper, or specialist), and 120B (criminal intrigue) for the situation filed at the Sadar police headquarters in Jaisalmer.
Extra SP Narendra Choudhury told the Indian Express that after the default by the advertiser bunch, the "most significant levels of SBI" chose to sell the five-star property worth around Rs 200 crore for just Rs 25 crore.
"In this way, that specific gathering (Alchemist ARC) acquired a benefit of Rs 175 crore," he told the distribution. He recognized that technique was followed however added that the aim was "mala fide".
SBI'S OFFERS ITS SIDE OF THE STORY
The State Bank of India (SBI) has come out with a solid assertion after Pratip Chaudhuri's arrest. The bank gave an explanation on Monday, saying that the assets seized regarding the default were sold as per fair treatment in March 2014.
"All due processes were followed while making the said deal to the ARC," SBI said. The bank additionally referenced that the NPA deal was finished after Chaudhuri resigned in September 2013.
The country's biggest public loan specialist added that different advances were taken by the bank for the finishing of the undertaking just as the recuperation of the bank's contribution before the choice was at long last taken to allocate the NPA to the ARC.
"Consequently, as a component of the recuperation endeavors, the levy were relegated to an ARC in March 2014," the bank said in the assertion. It added that the deal to the ARC was done through a "set down process" according to the approach of SBI.
"We further comprehend that the borrower was exposed to IBC (Insolvency and Bankruptcy Code) process by the said ARC and the asset has been procured by a NBFC (non-banking monetary organization) in December 2017, again through fair treatment compelled of NCLT (National Company Law Tribunal), Delhi," SBI said.
The bank additionally referenced in its explanation that the FIR filed by the borrower with the state police didn't specify it regardless of the case including its loan account. "It comes to pass since the borrower had at first filed a FIR with the state police against the offer of assets to ARC. It shows up from the duplicates of the procedures currently got to by us that the court doesn't seem to have been advised accurately on the grouping of occasions. In however much SBI was not involved with this case, there was no event for the perspectives on SBI being heard as a feature of the procedures," SBI said.
The bank emphasized that it had followed fair treatment and proposed to help out law authorization and legal specialists, and would give additional data whenever required.
ALCHEMIST ARC REACTS
Alchemist ARC has additionally delivered an assertion after the arrest of Pratip Chaudhuri. It condemned Hotel Gaudavan for more than once utilizing lawful hardware to "sidestep laws".
The ARC blamed the gathering for "running after irritating and maligning the leading body of AARC". The ARC has likewise named the arrest of Pratip Chaudhuri as "strange".
It proceeded to say that the Supreme Court has recently suppressed a FIR enrolled by the borrower in Jaipur and maintained the IBC cycle followed by AARC for the goal of Hotel Gaudavan's assets.
AARC added that SBI had just doled out the loans and no offer of property was involved. "The charges by the Hotel Gaudavan Private Limited are a demonstration of their famous nature," it added.
TOP BANKERS SHOCKED, EXPRESS DISPLEASURE
The scene has baffled some top bankers in the country who have stood up against the unexpected arrest of Pratip Chaudhuri.
Former SBI appointee director chief Sunil Srivastava communicated disappointment over the arrest on Twitter.
"To be honest, without notice and without summons, how could police from another state arrest somebody in Delhi, where is the fair treatment of law?" he inquired.
"Totally regrettable, is the framework being gamed again by defaulters in spite of all endeavors by Modi govt, time for upgrade of legal cycles to further develop straightforwardness and present responsibility," Srivastava added.
Former SBI chairman Rajnish Kumar additionally communicated disappointment over Pratip Chaudhuri's unexpected arrest, calling it amazingly terrible and a "instance of overbearingness".
Kumar added that the case appeared to be "exceptionally energetic" and that there appeared to be an "mistake of judgment".
Indian Banks' Association (IBA) chief leader Sunil Mehta told Business Standard paper that the loaning and offer of assets are monetary choices, and they are executed by sticking to severe due steadiness standards.
"Such arrests are a grave matter and the affiliation will raise the issue with the Department of Financial Services and Rajasthan government," he said. "The administration board of trustees of IBA will likewise look for redressal," he told the distribution.
In the mean time, FICCI president Uday Shankar told CNBC-TV18 that Chaudhuri's arrest is an "disturbing turn of events".
Shankar said the move could "genuinely subvert the determination of the individuals from the banking crew to push forward with the recuperation interaction for loans where there has been a default.
The way that the arrest occurred on a day when the Ministry of Finance gave nitty gritty rules to state-possessed banks for embracing uniform staff responsibility system for NPA accounts up to Rs 50 crore came as a greater shock to bankers.
This is on the grounds that the system has been intended to ensure bankers on the off chance that bonafide business choices turn out badly and lead to NPAs.