Failure to adhere to RBI guidelines in loan disbursement constitutes fraud, leading to contempt for willful defaults and necessitating CBI investigation.

JUDGMENT :

1. Heard Shri Rohan Gupta, learned counsel for the petitioner, Shri Anurag Khanna, learned Senior Advocate assisted by Shri Sandeep Arora, learned counsel for the State Bank of India, Shri Ashok Shankar Bhatnagar, learned counsel for Punjab National Bank and Oriental Bank of Commerce, Shri R.V. Pandey, learned counsel for the Bank of India, Shri Yashwant Singh, learned counsel for the UCO Bank, Sri Manish Trivedi, learned counsel for the ICICI Bank, Sri Abhinav Mehrotra, learned counsel for Bank of Baroda and Shri Nishant Mehrotra, learned counsel appearing for one of the Directors and Shri Ravindra Singh, learned counsel for Intervening Applicants (Cane Co-operative Societies).

2. This is a shocking case of clear connivance of unscrupulous businessman and banks, wherein the bank officials have knowingly allowed the petitioner to syphon away almost Rs.1300/- crores of the public money. Here the banks had advanced hundreds crores of rupees to the petitioner company knowing the fact that they have already defaulted with the loans taken by other banks previously and been declared N.P.A., still the banks went ahead and approved loans running into several hundred crores and the entire loan was disbursed without following the mandatory steps/procedures, which banks are supposed to take before disbursing the loan.

3. After the default of the petitioner in paying back the loan of the first bank, the bank instead of proceeding to recover this amount, gave a long rope to the petitioner to take loan from the second bank. This second bank also very easily without following the mandatory steps grants a loan without any adequate security, which was never paid back by the petitioner. Thereafter, the petitioner moves on to the third bank for another loan and this bank also grants a loan without any due diligence, and without following the norms and guidelines of Reserve Bank of India for loans to the company, and without even adequate security or additional security and without doing any regulatory compliances this bank again disburses a huge loan and further, do not carry out the post disbursement supervision and lets the petitioner to syphon away the entire amount.

4. The petitioner adopted the same modus operandi again and again with 7 banks and surprisingly, rather shockingly, all the seven banks had extended loan facilities to the petitioner without any due diligence, credit approval, risk report appraisal and without following the RBI guidelines to advance loans to the companies and also without adequate security and in few of the cases a personal guarantee was given by the promoters to many banks.

5. Shockingly, the banks, even after declaring the petitioner’s account as NPA has not taken any effective steps to recover the amount. In fact it will not be wrong to say that no sincere effort had been taken by the banks and all the efforts shown to have been taken was nothin