Police and judicial arbitrariness has rattled bankers, who now fear that such rude action by the authorities will delay decision-making and affect the cleaning of bank loan books. Bankers say that arresting the former head of the largest bank without proper investigation sends a wrong message and is harmful to the system.
Former SBI chairman Rajnish Kumar called it extremely unfortunate and an extreme case of arbitrariness.
“Prima facie it appears to be a case of misrepresentation of facts and excludes a person who has held a high position to get publicity. No consideration is given to the dignity of a person in the process. It needs to be seen whether the due process of law has been followed,” Kumar told ET.
Choudhary was arrested by the Rajasthan Police from his Delhi residence and was taken to Jaisalmer on Monday. His subsequent bail application was rejected by the magistrate officer.
The case refers to the ‘Garh Rajwada’ hotel project in Jaisalmer, which was financed by the State Bank of India (SBI) in 2007. As the project was not completed for three years and a key promoter passed away in April 2010, the account slipped into NPA. in June 2010.
As the bank’s recovery or revival efforts did not bear fruit, SBI sold the loan to Alchemist Asset Reconstruction Company (ARC) in March 2014.
Ironically, bankers say that Choudhary retired from the bank six months ago in September 2013.
SBI said in a statement that the sale to Alchemist ARC was done as per the prescribed procedure. Further, the account was taken to bankruptcy court and was acquired by a non-banking finance company in December 2017.
The arrest without any proper notice or summons to the bank or Choudhary has angered the present and former SBI officials. Fomar SBI Deputy Managing Director Sunil Srivastava took to Twitter to express his displeasure.
“Obviously, without any notice and without summons, how can the police of any other state arrest someone in Delhi, where there is due process of law? Absolutely pathetic. Is the system by defaulters despite all the efforts of the Modi government? It is being revamped, it is time for an overhaul. Judicial processes to improve transparency and introduce accountability,” Srivastava said.
To be sure, it is not clear whether Chowdhary was arrested because of his role as the chairman of SBI or because he was later the chairman of Alchemist ARC. Interestingly, Alok Dhir, the promoter of Alchemist ARC, was not arrested and had switched off his phone when ET tried to contact him.
“Whatever it is has no logical or legal basis,” the head of a large public sector bank said on condition of anonymity. “There have been several court orders including that of the Supreme Court that the directors are not liable for the faults or offenses of the company management. Some lower level judicial and police officers who have no clue of how banking works, have to please the higher ones. These high-handed decisions take ups. This must stop,” said this CEO.
SBI said that despite the matter relating to his loan account, he was neither summoned nor asked his side of the story.
“It is now learned that the borrower had initially lodged an FIR with the State Police against the sale of the property to the ARC. Against the negative closure report filed by the police officers, the borrower had filed a ‘Protest Petition’ before the Hon’ble CJM Court. Incidentally, SBI was not made a party to the case. All the Directors of that ARC including Mr. Chowdhary, who joined their Board in October 2014, have been named in the said case. Incidentally, Mr. Chowdhary The bank retired from service in September 2013,” SBI said.
The bank said it has now received copies of the proceedings which show that the court was not properly informed on the sequence of events.
“In so far as SBI was not a party to the matter, there was no opportunity to hear the views of SBI as part of this proceeding. SBI would like to reiterate that all due process was followed while making the said sale to ARC. The bank has already offered its cooperation to law enforcement and judicial authorities and will provide further information, if any, that may be sought from their end,” SBI said.
Bankers said that despite recent judicial and police outreach, lessons have not been learned. They were referring to the dramatic arrest of June 2018
CEO, Ravindra Prabhakar Marathe, and Executive Director, Rajendra Kumar Gupta. The police later filed a closure report for lack of evidence and Marathe and Gupta were reinstated in the bank.
The CEO of the bank quoted above said, “The point is that the police were not punished. There is no punishment for wrong cases and decisions that can destroy careers. Law enforcement agencies are not acting responsibly. and it will have economic consequences.”