In a setback to B.R Shetty, NRI entrepreneur and promoter of UAE-based NMC Healthcare, the High Court of Karnataka has rejected his plea against the action of the Bureau of Immigration restraining him from leaving India based on the Lookout Circulars (LOCs) issued by two public sector banks to whom his companies owe around ₹2,800 crore.
The immigration authorities on November 14, 2020, denied him permission to fly to Abu Dhabi from Bengaluru airport based on the two LOCs issued by the Bank of Baroda (BOB) and the Punjab National Bank (PNB) in May and July respectively in relation to default of loans granted to companies promoted by him.
Justice P.S. Dinesh Kumar dismissed the petitions filed by Dr. Shetty while holding that action of the banks and immigration authorities cannot be interfered with as the petitioner, as per the law, has an opportunity to approach the banks, which have issued LOCs against him, and explain them that the LOCs were issued wrongly.
Approach banks
“Unless Dr. Shetty exhausts the remedy of approaching BOB and PNB and explains to them how the LOCs have been wrongly issued, and the banks pass any further orders, his prayer to permit to travel to Abu Dhabi cannot be considered,” the court said.
On his claim that he was only the guarantor for the loans and that he had demitted the posts managements of the companies based in UAE and the banks have also initiated process in UAE, the HC said the petition was liable to be dismissed on the threshold because of the admission by the petitioner that he was the guarantor as “a guarantor is equally liable to repay the debt.” Moreover, the petitioner himself was the promoter of these companies, it noted.
The companies promoted by Dr. Shetty owe ₹2,000 crore and ₹800 crore to BOB and PNB respectively and he is the guarantor for the borrowed sums. He had come to India in February last year and wanted to go back to UAE in November.
Re-visit lending guidelines
The HC also observed that, “it is time, the law makers and the Reserve Bank of India re-visit the lending guidelines and the procedures and take necessary remedial measures to ensure that public money is well secured before disbursement.”
Justice Kumar made the observation while pointing out that the banks, on being asked about on what security they had huge sums as loan to Dr. Shetty’s companies, had not only stated companies were listed in London Stock Exchange and the share value had shown that the companies had high net worth.”
Noticing that tangible assets, if any, mortgaged in favour of the banks by Dr. Shetty’s companies and their valuation are not forthcoming, the court observed: “If Public Sector Banks are permitting such a large exposure without adequate securities, it is a matter of great concern and it shall have serious adverse impact on the economy of this country.”
Pointing out that the power, vested since 2017, with the chairperson of the banks to issue LOCs can be exercised only in exceptional cases against fraudsters, persons taking loans and wilfully defaulting, money launderers, etc., it was contended on his behalf that he does not fall under any such category.
It was contended on Dr. Shetty’s behalf that loans were borrowed in UAE and not in India, and default in repayment occurred during 2019-20 after he stepped down from the management of the companies in 2017.
