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Explained: The case against former SBI chief Chaudhuri, and the bank’s defence – The Indian Express

On Sunday (October 31), the Finance Ministry issued detailed norms to guide state-owned banks in adopting a uniform staff accountability framework for NPA (non performing assets) accounts up to Rs 50 crore. The step was taken to protect bankers in case bona fide business decisions went wrong.

On the same day, Rajasthan Police moved to arrest the former chairman of State Bank of India (SBI) Pratip Chaudhuri in a case relating to a hotel project, Garh Rajwada, in Jaisalmer that was financed by SBI in 2007.

The Garh Rajwada project, which was promoted by the Godawan Group, remained incomplete, and the main promoter passed away in April 2010.

Chaudhuri retired as SBI chairman after a two-year term in September 2013. In October 2014, he joined the board of Alchemist Asset Reconstruction Company Ltd, to which the hotel was later sold to recover the bank’s money.

The police action drew sharp reactions from bankers, who voiced their concerns over the development.

The case

According to police, the allegation against Chaudhuri was that SBI had sold properties that were worth Rs 200 crore to Alchemist ARC for only Rs 25 crore after seizing them for default on a Rs 24-crore loan.

The Magistrate Court in Jaisalmer rejected Chaudhuri’s application for bail on Monday (November 1), and sent him to 14-day judicial custody.

According to police, a team acting under the directions of Jaisalmer superintendent of police (SP) Ajay Singh arrested Chaudhuri from his residence in Delhi on Sunday.

Chaudhuri is “accused under Indian Penal Code sections 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 lodged at the Sadar police station, SP Singh said.

Additional SP Narendra Choudhary said: “There was a five-star property in Jaisalmer worth around Rs 200 crore. Following a default (by the property owners) it was decided by the highest levels of SBI to sell it. And the bank sold it for about Rs 25 crore. Thus, a particular group gained a profit of Rs 175 crore. They followed the procedure, but the intention was mala fide.”

Besides Chaudhuri, all the other directors of Alchemist ARC too have been named in the case.

SBI’s position

In a statement, SBI said: “All due processes were followed while making the said sale to the ARC.”

The account had become a non-performing asset (NPA) in June 2010. “Various steps taken by the bank for completion of the project as well as recovery of the bank’s dues didn’t yield the desired results,” SBI said.

Hence, as part of the recovery efforts, the dues were assigned to an ARC in March 2014, it said. The sale to the ARC was done through a laid-down process as per the policy of the bank, the SBI statement said.

“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.

After recovery efforts failed, approvals for sale to the ARC were taken in January 2014, and the assignment to the ARC was completed in March 2014, it said.

“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 this proceedings,” SBI said.

The bank has already offered its cooperation to law enforcement and judicial authorities, and would provide further information, if any, which may be called for from their side, it said.

“Aggrieved against the negative closure report filed by police authorities, the borrower had filed a ‘protest petition’ before the CJM court. Incidentally SBI was not made a party to this case,” SBI said.

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