There was reportedly no information or formal summons in the decade-old bitter-loan case in which the banking sector has been shaken, prompting concerns the incident may delay decision-making in several lenders’ multi-billion-dollar recovery initiatives.
Former SBI Chairman Rajnish Kumar Termed the arrest of his predecessor as extremely unfortunate and arbitrary. “Prima facie, it appears to be a case of misrepresentation of facts and publicity to a person holding a high position,” Kumar told ET. “In this process, no consideration has been given to the dignity of an individual. It needs to be seen whether due process of law has been followed.”
Account acquired by an NBFC in 2017
Chaudhary 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 local magistrate. The case refers to the ‘Garh Rajwada’ hotel project in Jaisalmer, financed by the State Bank of India in 2007.
- Choudhary was arrested from his Delhi residence by Rajasthan Police and taken to Jaisalmer on Monday.
- The local magistrate rejected his bail plea
- The case refers to a Jaisalmer hotel project, which was financed by SBI in 2007, the account became an NPA in 2010
- Choudhary retired in 2013. NPA was sold to ARC in 2014
- Bank not summoned or its views sought in the matter
Since the project was not completed for three years and a prominent promoter died in April 2010, the account slipped into the category of non-performing asset (NPA) in June 2010.
As the country’s largest lender failed to revive the large-scale project, State Bank of India sold the loan to Alchemist Asset Reconstruction Company (ARC) in March 2014.
To be sure, it is not clear whether Choudhary was arrested because of his role as the chairman of SBI or because he was later the chairman of Alchemist ARC, which bought assets from the bank. Police officials in Rajasthan could not be immediately contacted for their comments.
Ironically, bankers said Chaudhary had retired from the bank in September 2013, six months before the sale of the loan.
SBI said in a statement that the sale to Alchemist ARC was done as per the prescribed procedure. Further, the account was taken to the bankruptcy court and was acquired by an NBFC in December 2017.
‘No legal basis’
The arrest of neither the bank nor Choudhary, without any proper notice or summons, has not gone down well with the present and former officers of SBI. Former SBI Deputy Managing Director Sunil Srivastava expressed his displeasure on Twitter. “Obviously, without notice and without summons, how can the police of any other state in Delhi arrest someone? Where is the due process of law? Absolutely pathetic. Is the system being revamped by the defaulters despite all the efforts of the Modi government? It is being spoiled by overhaul of judicial processes to improve transparency and introduce accountability,” Srivastava wrote on the social media platform.
Interestingly, Alok Dhir, the promoter of Alchemist ARC, was not arrested and his mobile phone was switched off when ET tried to contact him. “Whatever it is, there is no logical or legal basis,” the head of a large public sector bank said on condition of anonymity. “Many court orders have been made, including from the Supreme Court, that directors are not responsible for the faults or offenses of the management of a company. There are some lower level judicial and police officers who have no clue of how banking functions. High hand decision making to please higher officials. This must stop.”
‘SBI case not to party’
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 officials, the borrower had filed a ‘protest petition’ before the CJM court . ,” SBI said in a statement. “Incidentally, SBI was not made a party to the case. All the directors of that ARC including Mr. Choudhary, who joined his board in October 2014, have been named in the said case. Incidentally, Mr. Choudhary Retired from the service of the Bank in Sept. 2013.”
The bank said it has now accessed copies of the proceedings to show that the court had not been correctly briefed on the sequence of events.
the bank provides support
“While SBI was not a party to the matter, there was no opportunity to hear the views of SBI as part of these proceedings,” the bank said. “State Bank of India would like to reiterate that the entire procedures were followed while making the said sale to ARC. The bank has already offered its cooperation to law enforcement and judicial authorities, if any, and will provide further information , that may be called for from their side.”
Bankers said lessons have not been learned despite the recent judicial and police overreach. He was referring to the dramatic June 2018 arrests of Bank of Maharashtra CEO Ravindra Prabhakar Marathe and executive director Rajendra Kumar Gupta. Later the police filed a closure report for lack of evidence and Marathe and Gupta were reinstated.
“The point is that the police have not been punished. There is no punishment for wrongful cases and decisions that can destroy careers. Law enforcement agencies are not acting responsibly and this will have economic repercussions, ” Said the CEO of the bank quoted above.