The Madras High Court on Wednesday came down heavily on a consortium of 13 banks for struggling to recover over ₹819 crore in dues from city-based jeweller Kanishk Gold.
It questioned how such a large sum of money was offered as a loan to a corporate without adequate collateral by the very banks that often refuse loans for education and agriculture.
Justice R. Mahadevan took a serious view of the issue when a writ petition filed by the State Bank of India, on behalf of a consortium of 13 banks. The banks were aggrieved over the action of the Enforcement Directorate (ED), which had attached properties of Kanishk Gold, though they had been either hypothecated or mortgaged as collateral security.
“When poor students seek education loans, these banks lay down so many conditions and demand properties worth more than the loan amount to be furnished as collateral. In this case, you have financed a party that had purchased properties with the term loans that you sanctioned and offered them as primary security. What is all this? This court shall order a CBI inquiry against all the bank officials and see to it that they are behind bars. Banks have a responsibility to save public money, not to throw away nearly ₹1,000 crore to unscrupulous elements just like that,” the judge said and refused to grant any interim order in favour of the banks.
Though the petitioner’s counsel pointed out that the adjudicating authority under the Prevention of Money Laundering Act (PMLA) of 2002 had summoned the representatives of the banks on September 5, the judge said: “Go and appear. I won’t grant any interim stay. What is wrong with the enforcement agencies issuing a notice to you? You cannot be termed as secured creditors in this kind of case. The SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest) Act of 2002 will not come into play when Enforcement Directorate has a suspicion that the properties had been purchased with proceeds of a crime.” The judge later ordered that a notice be served on N. Ramesh, Special Public Prosecutor for ED, and adjourned the hearing to Monday.
In an affidavit, filed in support of the writ petition, it was stated that the consortium of banks had extended credit to Kanishk Gold from time to time for its business operations. The outstanding amount as on March 15 this year was ₹819.56 crore.
Bhoopesh Kumar Jain and his wife Neeta B. Jain were the directors of the jewellery firm and they had not responded despite several notices and reminders issued by the banks. All the loan accounts became non-performing assets and hence proceedings were initiated under the SARFAESI Act to recover the dues.
However, when the banks found that the primary securities had vanished, they lodged a complaint with the CBI on January 25 and got a First Information Report registered on March 21. Thereafter, when a decision was taken to auction the collateral securities, ED attached all those properties under PMLA.
Claiming that major portions of the attached properties were those that had been offered as collateral security and not purchased out of bank funds, the consortium contended that such properties could not be termed as tainted properties that could be attached under PMLA.
