Court Order Against Bank And Bank Officer

CBI chargesheets Gujarat-based branch manager of Indian Overseas Bank for cheating-Business Standard

The CBI has filed a charge sheet against a Gujarat-based branch manager of Indian Overseas Bank (IOB) and three others for allegedly cheating the bank to the tune of Rs 2.5 crore.

In its charge sheet filed before a Special CBI court in Ahmedabad, the agency has charged the branch manager and his accomplices with criminal conspiracy, cheating, forgery and under provisions of the Prevention of Corruption Act.

The agency has accused them of conspiring to cheat Indian Overseas Bank, Himmatnagar Branch, Sabarkantha (Gujarat), and causing an alleged loss to the tune of Rs 2.53 crore, a CBI spokesperson said here today.

Speaking on the allegations, the CBI spokesperson said, "The branch manager, in conspiracy with the private persons, sanctioned agricultural term loans for making Green House projects without obtaining any document." "However, no such Green House projects were undertaken and the loans were disbursed without following the laid down norms," the spokesperson added.

    

 

5 entities file lawsuit against ICICI Bank UK alleging mis-selling

Bank dismisses mis-selling charges, says lawsuit filed after it initiated legal recovery action over loan default

 

 

Five entities belonging to an investor have filed a lawsuit against ICICI Bank UK in Belgium, where the bank has a branch, claiming compensation of about $130 million, lawyers close to the development have said.

The entities have accused the bank of mis-selling financial products, which led to a loss of a $32 million to the group.

The claim for compensation is for the loss incurred, mis-selling and consequential damages.

The bank has, however, denied any wrongdoing.

“ICICI Bank has lending relationships with the customer.  After the customer defaulted on its payments, the bank has initiated legal recovery actions against the assets of the customer to protect its interests.  As a counter, the customer has filed a complaint against the bank for an old facility, which the customer repaid a few years ago.

“The bank has vigorously denied and rebutted all allegations and claims made by the customer. The matter is sub judice in a Belgium court,” an ICICI Bank spokesperson said in an e-mailed response to query by Business Standard.

It is learnt the bank attached the customer’s assets in Hong Kong after it defaulted on the loan.

According to people familiar with the development, the alleged mis-selling was in 2007-08; the lawsuit was filed early this year. Currently, the plaintiffs and ICICI Bank UK are giving submissions to the court. A hearing is scheduled for June                                      2015.

It has been alleged though the bank sold financial products such as snowball interest rate swaps, targeted accrual redemption note options and Box options, it did not explain the risks.

ICICI Bank UK is one of the three foreign subsidiaries of ICICI Bank; the others are in Canada and Russia.

ICICI Bank UK has nine branches in the UK and one each in Belgium and Germany.

At the end of September this year, ICICI Bank UK’s total assets stood  $4.16 billion, while loans and advances were $2.71 billion.

For the quarter ended September, the bank recorded a profit after tax of $5.1 million.

At the end of the quarter, the bank’s capital adequacy ratio was 23.1 per cent. 

 

Wilful defaulter tag: high court rules in favour of Kingfisher Airlines directors-LiveMint

Calcutta HC rejects United Bank of India’s decision to tag Kingfisher Airlines directors as wilful defaulters on technical grounds

 

The Calcutta high court has said that state-owned lender United Bank of India’s decision to tag directors at Kingfisher Airlines Ltd as wilful defaulters has been rejected on technical grounds, two people close to the development said.

 

On Friday, the court said that the grievance redressal committee at United Bank, which called the shots on tagging promoter Vijay Mallya and three other directors at Kingfisher Airlines as wilful defaulters, constituted of four members, instead of three, as mandated by Reserve Bank of India (RBI).

 

“The decision was taken by the court on very technical grounds. We have an option to do the whole process again and declare him (Mallya) as a wilful defaulter again, which will take roughly a month’s time. We can also appeal against the court’s decision since no prejudice was caused against the borrower by having one extra member. We will take that call shortly,” said United Bank executive director Deepak Narang.

 

Narang said that even though the court decided against the wilful defaulter tag, it had upheld all the evidences that the bank had produced against Kingfisher Airlines.

In its master circular for classification of borrowers as wilful defaulters released in July 2012, the banking regulator states that in order to maintain transparency in the process, the decision to classify the borrower as wilful defaulter should be entrusted to a committee of higher functionaries headed by the executive director and consisting of two general managers or deputy general managers as decided by the board of the concerned bank or financial institution.

 

“Decision of the Hon’ble Court is self explanatory. No further comment,” a Kingfisher Airlines spokesperson said in a one-line response.

 

On 1 September, the Kolkata-based bank became the first lender to have tagged Mallya, A.K. Ganguly, Subhash Gupte and Ravi Nedungadi as wilful defaulters as per the RBI norms. United Bank has an exposure of around Rs.350 crore to the beleaguered airline which has been grounded since October 2012.

 

In an official statement, Kingfisher Airlines had then vowed to pursue “all available legal remedies” to secure its interest. The airline had been demanding that United Bank permit it to have legal representation of its choice at the hearing to be held before the grievance redressal committee set up by the lender. The court had directed Vijay Mallya to be present in person or through a company official when dealing with the committee.

 

The statement had alleged that the bank took the step even though the airline’s special leave petition against the Calcutta high court order is pending in the Supreme Court.

A wilful default occurs when either a borrower has not repaid when he can do so; when sanctioned funds have been diverted for other purposes; when the borrower has siphoned off funds; or when the borrower disposes of the assets pledged for availing of the loan without the bank’s knowledge.

Once a director of a borrowing company is tagged as a wilful defaulter, banks could deny further loans to any company where he is present as a director. Banks would also be empowered to use loan recovery options aggressively.

Kingfisher Airlines owes Rs.6,521 crore to a lender consortium led by State Bank of India (SBI), according to the finance ministry. A few other state-owned banks, including SBI, are also in the process of deciding on the wilful defaulter tag for the airline.

RTI Information For NPA Accounts

CIC: there is a provision in the rules of the bank to publish certain NPA details in newspapers & such information can be shared with the appellant; inspection of record for accounts where action under SARFAESI Act is being taken permitted

22 Dec, 2014

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Facts:
1. The appellant, Shri Sandeep Godika, vide his RTI application dated the 13th March, 2013 sought certain information from the CPIO of SBBJ, Jaipur.

2. Vide letter dated 4.4.2013, the CPIO provided the information requested for. However, in respect of Point No. 2(b) he denied the information on the ground that the same pertains to other Account Holders and is exempt under clauses (d), (e) and (j) of subsection (1) of section 8 of the RTI Act and that no larger public interest exists to disclose the same. He filed first appeal questioning the reply with regard to Point 1(b) and 2(b). His first appeal dated 9.5.2013 against the reply of CPIO was rejected vide order dated 18.5.2013 as in his opinion the requested for information falls under the exempted categories of section 8(1).

3. Against the order of the First Appellate Authority, Shri Godika has filed second appeal. His main grounds of challenge are that – (i) the CPIO has failed to provide details of each account separately and also failed to provide copy of note sheet; (ii) As per the information supplied by the CPIO, there is a provision of publishing the names and photos of Account Holders in the newspapers. Therefore, if the names and photos can be published in the newspapers, then the requested for information cannot be confidential; (iii) It is clearly stated in section 8 that “Provided that the information which cannot be denied to the Parliament or a State Legislature shall not be denied to any person.”

4. The stand of the CPIO and the First Appellate Authority is that since the information asked for by the appellant relates to other account holders, it is exempt under clauses (d), (e) and (j) of section 8 (1) of the RTI Act and there is no public interest in disclosing the information.

5. The matter was heard today. The respondent has not filed any written reply to the appeal. I have gone through the documents on record and the arguments advanced during the hearing. It is noticed that both the CPIO and the FAA have not given any reason for coming to the conclusion that the information is exempt under clauses (d), (e) and (j) of section 8 (1) of the RTI Act and that there is no public interest involved in disclosing the information.

6. It has already been held by the Commission in its order dated 16.9.2009 passed in Appeal No. CIC/PB/A/2008/00946/SM etc. that the Bank assigns the NPA accounts of borrowers only after it fails to recover its dues. This act marks an end of any confidential relationship that might have existed between the Bank and those borrowers.

7. As per the information sought in Point No. 1(b), the respondents stated that the information relating to different stages of recovery of the loans given is not readily available with them. Collecting such information would result in disproportionate diversion of resources. Besides, the recovery situation changes from day to day.
8. The contention of the appellant that there is a provision to publish the names and photos of the NPA account holders in the newspapers is not disputed.

9. For Point No. 2(b), the respondents stated that the information of 111 cases is not available with them in a consolidated manner; therefore, it will require time and manpower to collect it. The CPIO stated that he will be able to provide the names of newspapers where the name, photograph are published in case of those accounts in which action under SARFAESI Act is being taken.

CPIO’s contention that the information is denied under 8(1)(d), (e) &(j) of the RTI Act, 2005, cannot be upheld. The CIC decision dated 16.9.2009 in appeal no. CIC/PB/A/2008/000946SM & SM/A/2008/000015 refers to in this matter according to which “The bank assigns the NPA accounts of borrowers only after it fails to recover its dues. This act marks an end of any confidential relationship that might have existed between the bank and those borrowers.”

10. However, the Commission has also held in its order dated 18.04.2012 passed in Appeal No.CIC/SG/A/2012/000471 in which the present appellant was also the appellant wherein it is held as follows: “In the present matter, very clearly a fiduciary relationship exists, since all customers of the Respondent public authority come to it because of the implicit trust they have; and they provide information to the bank for their own benefit.

Customers also have a choice of which bank they wish to approach. Hence, unless a large public interest is shown the information is exempted from disclosure and no case of larger public interest has been established in the instant case. Therefore, the names and details of NPA borrowers is exempt under Section 8(1)(e) Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen, information available to a person in his fiduciary relationship, unless the competent authority is satisfied that the larger public interest warrants the disclosure of such information; of the RTI Act.”

11. In the instant case admittedly there is a provision in the rules of the bank to publish certain NPA details in newspapers and, therefore, the information which is already published in the newspaper can be shared by the CPIO with the appellant.

Decision Notice
12. In view of the larger public interest involved in the matter as the volumes of NPAs are huge amounting to over two lac crore in case of nationalized and public sector banks alone (source, Deportment of Banking Supervision, RBI) as on 31.3.1013, the CPIO is directed to allow inspection of record with reference to point 1(b) of the RTI request only for accounts where action under SARFAESI Act is being taken, severing any confidential information at a mutually convenient date and time and give the details regarding news papers with dates on which the details of 111 NPA cases were published, within three weeks of the receipt of the order of the Commission The CPIO‘s decision is upheld with respect to the other points of the RTI application.
13. The appeal is disposed of with above directions.
14. Copy of this order be given free of cost to the parties.
 
(Manjula Prasher)
Information Commissioner
Citation: Shri Sandeep Godika v. SBBJ in Appeal: No. CIC/VS/A/2013/001062/MP

http://www.rtifoundationofindia.com/cic-there-provision-rules-bank-publish-certain-npa

Supreme Court On Vehicle Insurance

Source:Business Standard 14/12/2014
Financier not liable to pay damages
If a motor vehicle is hypothecated to a finance company and the borrower does not insure it, the claim for compensation must be paid by the latter, and not the financier, the Supreme Court has held in the judgment, HDFC Bank Ltd vs Kumari Reshma.

It set aside the Madhya Pradesh High Court view that it was the lender who was liable to pay compensation if the borrower does not insure the vehicle and meets w...ith a road accident, raising claims by the victim.

The high court relied on the term in the loan agreement that the bank was required to get the vehicle insured if the borrower failed, to or neglected to, get the vehicle insured. Overruling that view, the Supreme Court asserted that "the person in possession of the vehicle under the hypothecation agreement is the owner", according to the provisions of the Motor Vehicles Act.

Though the bank was the registered owner of the vehicle along with the borrower, the latter was "in control and possession of the vehicle". If he neglects to take insurance and causes injury to a road user as in this case, the borrower is liable to pay compensation.

Settlement must be free from duress-Business Standard

M J Antony  14th December 2014

 

Settlement of disputes can be challenged in court if a dominant corporation uses coercion, duress or undue influence of various types against a weak party. But the duress must be proved by showing evidence and documents that show undue influence around the time when the settlement was thrust upon the other party. The protest must be made without loss of time, not after undue delay. A bald allegation of duress would not be sufficient, the Supreme Court has stated in the appeal case, New India Assurance Co vs Genus Power Infrastructure Ltd. In this case, the firm purchased a "standard fire and special perils policy" from the insurance company. There was a fire explosion in the nearby Indian Oil Corporation (IOC) terminal causing extensive damage to the firm's unit. Though it claimed Rs 29 crore as its loss, the insurer's surveyor assessed it at Rs 6 crore. However, the firm signed a letter of subrogation in favour of the insurers for Rs 6 crore in full and final settlement. It assigned all its claims to the insurance company for recovery of amounts from IOC, RIICO, the Rajasthan government and others who are liable. Later Genus declared that the document was signed under duress and moved the Delhi High Court for appointment of an arbitrator in the disputes. The high court appointed an arbitrator. The insurance company appealed to the Supreme Court, pointing out the settlement document, objecting to arbitration. The Supreme Court set aside the high court order of arbitration. It said that the allegation of duress and undue influence was not supported by evidence and the objection was raised late.

FCI told to regularise casual labour

The Supreme Court directed Food Corporation of India (FCI) last week to regularise 49 workers who were kept as casual employees for a long time, holding the practice to be an "unfair labour practice". They were earlier working in a rice mill of FCI at Durgapur under various contractors. The mill was closed in 1990 and the contract system abolished. Thereafter, the workers were directly employed by FCI as casual employees on daily wage basis. The workers, then, demanded regularisation and the dispute was referred to the labour tribunal. It held that the continued casualisation of the service was unfair labour practice according to the fifth schedule of the Industrial Disputes Act and against social justice principles. FCI was asked to regularise them. The management moved the Calcutta High Court ,which set aside the tribunal's award. Durgapur Casual Workers Union appealed to the Supreme Court. It set aside the high court decision and upheld the tribunal's order.

Financier not liable to pay damages

If a motor vehicle is hypothecated to a finance company and the borrower does not insure it, the claim for compensation must be paid by the latter, and not the financier, the Supreme Court has held in the judgment, HDFC Bank Ltd vs Kumari Reshma. It set aside the Madhya Pradesh High Court view that it was the lender who was liable to pay compensation if the borrower does not insure the vehicle and meets with a road accident, raising claims by the victim.

 

The high court relied on the term in the loan agreement that the bank was required to get the vehicle insured if the borrower failed, to or neglected to, get the vehicle insured. Overruling that view, the Supreme Court asserted that "the person in possession of the vehicle under the hypothecation agreement is the owner", according to the provisions of the Motor Vehicles Act. Though the bank was the registered owner of the vehicle along with the borrower, the latter was "in control and possession of the vehicle". If he neglects to take insurance and causes injury to a road user as in this case, the borrower is liable to pay compensation.

Arbitration can't be opposed midway

A party to the arbitration proceedings cannot raise objections regarding jurisdiction of the tribunal midway, the Supreme Court stated in the judgment, M/s MSP Infrastructure Ltd vs M P Road Development Corporation Ltd. The disputes in this case were referred to arbitration and the tribunal partly allowed the claim of the contractor. The corporation appealed against it under the Arbitration and Conciliation Act before the district judge. He dismissed it as the appeal was filed two years late, calling the action absolutely unjust and unfair. However, the Madhya Pradesh high court allowed the corporation's appeal. The firm appealed to the Supreme Court, which quashed the high court order.

Mining federation petition dismissed

The Delhi High Court dismissed the writ petition of the Federation of Indian Mineral Industries last week seeking a declaration that the notification of the Union Ministry of Mines issued on July 18 amending Rule 24A(6) of the Mineral Concession Rules is prospective in nature. The federation had raised several technical objections and cited Supreme Court cases to get the declaration. The rules regarding extension of leases were unreasonable and arbitrary, it was argued. However, the high court rejected all challenges and stated that a court would not give a declaration on hypothetical or speculative facts, unless there is a real cause of action or injury. "It is not the exercise of judicial power to write legal essays or to give advisory legal opinions. A judge never gives a decision until the facts necessary for that decision have arisen because the imagination of judges, like that of other persons, is limited," the judgment said.

Dispute over condom name resolved

The Delhi High Court stated last week that in a suit for violation of trade mark, if the alleged offender was not aware of the existence of a registered trade mark and admits the mistake at the threshold, it could not be compelled to pay damages and rendition of accounts. It would save the time of the court and the award of damages would be harsh and unjustified. In this case, DKT India vs HLL Lifecare Ltd, the former claimed that HLL, a government of India undertaking that is the largest seller of condoms in the world, had violated its trade mark MoodsXXX. It demanded Rs 45 lakh in damages. The government firm admitted its mistake and undertook not to use the name. It offered Rs 1 lakh to DKT. But the latter was not satisfied. The high court stated that the government company was willing to settle the dispute amicably throughout and had stopped the sale of the brand. Therefore, the demand of a huge compensation was unjustifiable. Moreover, the Trade Marks Act and the Copyright Act take a liberal view in such cases.

 

Link Business Standard

DRT Gives Pain Or Relief

Debt recovery tribunals: More pains than gains for banks-Business Standard-17.12.2014

Experts suggest that the law should be strengthened to ensure mandatory time bound disposal of cases

The functioning of debt recovery tribunals (DRTs), created to help financial institutions recover dues speedily without being subjected to the lengthy procedures of usual civil courts, appears to cause more pain than gain for banks.

Consider this: The amount recovered from cases decided in 2013-14 under DRTs was Rs 30,950 crore, while the outstanding value of debt sought to be recovered was Rs 2,36,600 crore. In other words, recovery was only 13 per cent of the amount at stake. Also, while the law indicates that cases before DRTs must be disposed off in six months, only about a fourth of the cases pending at the beginning of the year were disposed during the year.

“The functioning of DRTs needs to improve to ensure banks are able to recover their existing loans and offer fresh advances at cheaper rates... In the current scheme of things, there is no mechanism in place to ensure that the tribunal disposes the case in a timely manner. There is a strong need to bring in more accountability for the DRT,” said Shashwat Sharma, partner (management consulting), KPMG in India.

One problem is the small number of DRTs and Debt Recovery Appellate Tribunals, where judgments of DRTs can be appealed. While there are 33 DRTs, there are only five Debt Recovery Appellate Tribunals in the country. “There is certainly a need for more number of DRTs. The biggest challenge, it appears, is their ability to deal with a subject with speed. The system that was designed is clearly not working. Probably, there should be a feedback mechanism and people involved with DRTs should be encouraged to point out the areas of pain,” said Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services.

Deepak Haria, senior director at Deloitte in India, echoed a similar view. “The challenge is that our judicial system is both clogged and inadequate in infrastructure, which slows down any redressal. Recovery can be speeded up only when there is a fixed time-frame for all disposals, and realisation of assets could be speeded up by having special courts to deal with such recoveries,” he said.

A consequence of this is credit cost increases even for borrowers who repay loans on time. For instance, banks now demand a credit-risk premium of close to six per cent from power companies to compensate for the risk of default. The average interest rate on loans to these companies is close to 14 per cent.

The functioning of DRTs is also keeping the Reserve Bank of India (RBI) worried. “If bankers cannot get their money back, they are not going to give you loans at cheap price. So, making sure debt recovery tribunals work better, making sure that you don’t have excess number of stays, excess number of appeals – that is what we need to focus on,” RBI governor Raghuram Rajan said earlier this month following the central bank's fifth bi-monthly monetary policy review.

Experts suggest that the law should be strengthened to ensure mandatory time-bound disposal of cases. Also, performance indicators of the adjudicating officer could be used to improve the efficiency of the system. A few recommended that stay petitions should be analysed before being accepted as there have been instances where advocates exploit the loopholes of the Act and plead for stays, leading to piling up of cases.

HOW TO OFFLOAD?

Rs 30,950 crore Amount recovered in 2013-14 under DRTs Rs 2,36,600 crore Outstanding debt sought to be recovered in 2013-14 13 per cent Actual recovery for the period (2013-14) While law indicates cases before DRTs must be disposed off in 6 months, only about a fourth of pending cases at the beginning of the year were disposed during the year   The small number of DRTs and Debt Recovery Appellate Tribunals may be a reason for the dismal scene. http://www.business-standard.com/article/finance/debt-recovery-tribunals-more-pains-than-gains-for-banks-114121600139_1.html Thursday, June 12, 2014 Fast Track Court For Loan Defaults Above Rs.100cr Government mulls roping fast-track courts to chase bad loans of Rs 100cr+ -Economic times 13th June 2014 NEW DELHI: The government is mulling fast-track courts to try loan default cases of over Rs 100 crore as part of a plan to reduce the pileup of bad loans at state-run banks.  The finance ministry has set up a committee headed by VK Bhasin, former secretary in the law ministry's legal department, to suggest measures to deal with high-value willful defaulters.  "The committee will also revisit recovery laws to make them more effective," a senior government official said on condition of anonymity. There are over 40,000 cases worth Rs 1.73 lakh crore pending before various debt recovery tribunals.  "These (fast-track) courts will have the mandate to settle issues within a time frame," the official said, adding that they will be empowered to auction personal assets of promoters to recover money.  The finance ministry is also looking at ways to make promoters accountable for the defaults.  "Promoters often hide behind a corporate veil and take no responsibility for failed ventures. The committee will suggest legal routes to make such promoters accountable," the official said. The top 30 non-performing accounts of state-run banks account for 40.2 per cent of their gross bad loans.  In 2013, bank unions had put out a list of top corporate defaulters, which included Kingfisher AirlinesBSE 3.31 %, Winsome Diamond, Zoom Developers and Electrotherm IndiaBSE 1.29 %.  Gross NPAs of public sector bank rose to 4.44 per cent in March from 3.84 per cent in the year-ago month. "In the case of Kingfisher Airlines, the banks could not seize the promoter's personal assets because of the existing legal complications.  We need to work out a mechanism where there should not be a rich promoter and an ailing company," said one of the committee members, which, besides banks, has representation from Indian Banks' Association.  The government is also  ..  Read more at: http://economictimes.indiatimes.com/articleshow/36453058.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst http://importantbankingnews.blogspot.in/2014/06/fast-track-court-for-loan-defaults.html

Declare Defaulter As Wilfull Defaulter Or No

Banks in no hurry to declare wilful defaulters-Business Standard-12.12.2014

Kingfisher Airlines may have been designated a wilful defaulter by its lenders, but the lengthy process and prospect of court cases deter banks

 

 

In September this year, United Bank of India declared the now-grounded Kingfisher Airlines and its Chairman Vijay Mallya as wilful defaulters for non-payment of dues of Rs 400 crore. Three other directors -Subhash R Gupte, Ravi Nedungadi and Anil Kumar Ganguly - also figured in that list. The airline had described the bank's action as "post-haste" and had vowed to pursue all legal remedies against the decision.

It is more than three months now, and United Bank is still the only bank to have declared Kingfisher a wilful defaulter despite the airline owing close to Rs 6,500 crore, much of it borrowed from a consortium of 17 banks. Kingfisher, meanwhile, has secured a stay from the Calcutta High Court on United Bank's decision to declare the airline and its directors as wilful defaulters. A few lenders, including the country's largest bank, the State Bank of India (SBI), have identified Mallya's company as a wilful defaulter but are yet to declare it as such.

Kingfisher's case is not a stray example. Bankers, on condition of anonymity, reveal that they are yet to initiate action against several other corporate borrowers, whom they want to classify as wilful defaulters, but haven't yet due to lack of sufficient evidence.

"It is more or less certain that if we declare a borrower a wilful defaulter, he will move court. Then it becomes our responsibility to justify our action with supporting evidence," explains a senior banker in charge of loan recovery at a mid-sized public sector bank. It is not always possible to establish that the borrower has siphoned off the money or used it for a purpose other than the one for which the loan was taken. "Hence, we need to be extremely cautious before we declare someone a wilful defaulter. Otherwise, we will not only lose the case, but we will also let the defaulter off the hook," he says.

According to the master circular released by the Reserve Bank of India (RBI) on July 1, 2014, a borrower is classified as a wilful defaulter in any of the following events: (a) the borrower defaults despite having the capacity to repay his dues, (b) the borrower defaults and has not used the money for the specific purpose for which the loan was availed of, (c) the borrower defaults, has siphoned off the funds, and the money is not available with him in the form of other assets, and (d) the borrower defaults and has disposed of the assets given as security against the loan without informing the lenders.

Bankers say that in the case of loans for working capital, it is sometimes difficult to prove the end-use of the funds in a court of law. The banking regulator's powers also appear restricted in cases like this. "I think sometimes there is a misconception that RBI is a superhuman," concedes RBI deputy governor SS Mundra. "There is a legislative process in the country, there is a judicial system. We can provide the regulations, we can provide the framework but we cannot say that the Reserve Bank can override everything."

Mundra also says that after getting feedback from banks, RBI marks these issues for the attention of the government. "What we can do and what we do is that we always flag these issues whenever we get feedback from banks," he adds. "We flag these issues in the right forum, for the government. Then in course of time we, seek the resolution. But I cannot just say that ours is the last word and courts cannot override us."

Not an overnight job
The whole process can be time consuming, and bankers say that the lenders need to follow certain processes before identifying and declaring a borrower a wilful defaulter. "It does not happen overnight," says another banker with a Kolkata-based public sector bank. "There is an internal committee that examines cases of wilful defaults. The loan recovery department gives its report on borrowers who are deemed to have wilfully defaulted to this committee. This panel then examines the repayment capacity of the borrower, end-use of the funds, recovery efforts before identifying him as wilful defaulter."

Once a borrower is identified as a wilful defaulter, the bank has to send him a notice detailing the reasons why the borrower has been deemed as such. Sometimes, the lender has to make available to the borrower the documents that it has relied upon to arrive at the decision. Generally, the borrower gets two weeks to make a representation before the bank's grievance redressal committee. Only if the borrower fails to offer a proper explanation for non-payment of dues or fails repeatedly to appear before this committee in spite of notices served, will he be declared a wilful defaulter.

This lengthy and fraught process is why most banks are wary about taking on people and corporate with unpaid dues. Some analysts believe that the banks should be empowered through amendments in laws and allowed to take action without every case going to court. "I don't think it (the delay in classifying a borrower as wilful defaulter) is because of a problem with our judiciary," explains Ashvin Parekh, managing partner at Ashvin Parekh Advisory Services and senior expert advisor on global financial services at Ernst & Young (E&Y). "The problem is with the Banking Regulation Act and the RBI Act. These need to be amended to empower both the banks and the regulator. It will reduce the incidence of referring such cases to the court."

Till that happens, lenders will probably continue to tread cautiously on declaring cases of deliberate non-payment as wilful defaulting.

WILFUL DEFAULTER A borrower is classified as a wilful defaulter in any of the following events: The borrower defaults despite having the capacity to repay his dues   The borrower defaults and has not used the money for the specific purpose for which the loan was given   The borrower defaults, has siphoned off the funds, and the money is not available with him in the form of other assets   The borrower defaults and has disposed the assets given as security against the loan without informing lenders PENAL MEASURES Banks are advised to send their list of wilful defaulters to RBI, the Securities and Exchange Board of India and the Credit Information Bureau India. This is aimed at preventing wilful defaulters from accessing capital markets and borrowing money from other banks and financial institutions. The penal measures include the following: No additional facilities will be granted to listed wilful defaulters by banks and financial institutions   Promoters of companies that have been identified for siphoning off funds, misrepresentation of accounts and fraudulent transactions will be debarred from institutional finance for floating new ventures for a period of five years   Legal process against wilful defaulters will be initiated. Lenders may initiate criminal proceedings as well.   Banks will adopt a proactive approach for a change of management of the willfully defaulting borrower unit http://www.business-standard.com/article/finance/banks-in-no-hurry-to-declare-wilful-defaulters-114121101294_1.html

Ultimatum To Provide ATM Security

Case against bank for lax ATM security-The Hindu-12.12.2014

December 31 deadline for ATM security

The city police have booked a case against Punjab National Bank for lax security at one of their ATM kiosks in Vasanthnagar, where a man confronted a woman and took her cellphone even as her friend waited outside.

 

The police have booked a case under Section 188 of the Criminal Procedure Code (CrPC) for violating the ATM security instructions issued by the Police Commissioner in 2013. The instructions were issued in the wake of the attack on a Corporation Bank employee in an ATM kiosk near N R Square on November 19, 2013.

 

The city police on Thursday met representatives of various banks to discuss ATM security. Around 30 representatives from various banks were present.

 

Additional Commissioner of Police (Law and Order) Alok Kumar said that, following a review of security measures at ATM kiosks across the city, the new deadline for complete compliance is December 31. He said jurisdictional police officers will evaluate the safety measures after December 31 and book cases for non-compliance.

 

http://www.thehindu.com/news/cities/bangalore/case-against-bank-for-lax-atm-security/article6683292.ece

Important News For All Bankers

Supreme Court ruling on e-records is a timely reminder for banks -Hindu Business Line-22.11.2014

By  Vinson Kurian

Thiruvananthapuram, November 21:  

Banks will ignore at their own peril a Supreme Court ruling that electronic records without proper safeguards are non-admissible as evidence.

 

Computer outputs (printed on paper, stored, recorded or copied in optical or magnetic media produced by a computer) are “secondary”, the court said. These are susceptible to tampering, alteration, transposition and excision and a whole trial based on them could lead to a travesty of justice, it observed in a concurrent order on Civil Case No 4226 of 2012. Failings in the banking sector on this count are best reflected in the CAG findings pertaining to the farm loan waiver scheme of 2008.

 

Of the 9,334 cases taken for scrutiny, 2,824 records were found to have been tampered with, overwritten or altered.

 

Audit trails

Responding to an RTI query, the RBI told S Dheenadhayalan, an activist, that it had advised banks to identify key risks that threaten computerised banking operations.

Banks must develop or design adequate internal control policies and procedures to mitigate risks, the RBI had said in a circular way back in February 1998. All transactions must be entered and accepted “once and only once, data accurately entered, standing data changes authorised and accurately entered.”

 

Sufficient audit trails, it said, must be maintained and placed with security procedures so that they cannot be altered.

 

But not many banks, including those in the public sector, seem to have gone the distance to ensure compliance. For instance, Indian Bank, according to Dheenadhayalan, admitted under the RTI that at least one of its branches was in possession of a standalone computer. In March 2010, the bank told Deepak Flexo Packs of Virudunagar, Tamil Nadu, that it had revised the waiver claim on its account from ₹32.53 lakh to ₹5.84 lakh.

 

Related data on how it arrived at the figure could not be retrieved since the system had crashed, he said. Pressed further, the bank merely said it was an isolated incident because it had occurred in a standalone computer.

 

As for policy of providing standalone computers at branches, there existed none. In some cases, standalones were provided for training staff. Some banks use them for routine administrative work which need not be connected to or fall under electronic data processing (EDP).

 

Standalone does not imply parallel tracking of factual reports. These computers could be used to generate convenient statement of claims, according to Dheenadhayalan.

In another case, Punjab National Bank made an inadvertent error in notifying claims while invoking the Sarfaesi Act on Raju Industries, Bangalore. A corrigendum issued by the bank in June 2010, said the figure of ₹33.92 lakh quoted in the possession notice was a mistake, and it must be read as ₹12.60 lakh.

 

Vigilance Commission alert

The Central Vigilance Commission (CVC) was forced to take note of frauds perpetrated on banks using passwords of other employees.

 

The CVC observed in a circular dated November 30, 2010, that bank employees in certain cases were not maintaining secrecy of their passwords.

 

“Instances are still coming to our notice where frauds of large amount have been committed by misusing the passwords of employees,” it noted. It should be ensured that all employees maintain secrecy of their passwords and keep changing them as frequently as possible, the circular said, adding that banks may evolve systems and procedures to ensure the same.

Instances of casual approach by any password holder should be dealt with ruthlessly by the bank concerned as the same may put huge amounts of funds at risk, the CVC noted.

 

Chief Vigilance Officers, it said, may take suitable action and regularly monitor the secrecy of passwords and apprise the Commission of action taken. They should report compliance in the matter by including this aspect in monthly reports being submitted to the Commission.

Link Hindu Business Line

 

Loan recast hides stress in banks

Times of India 22.11.2014

 

NEW DELHI: Banks seem to have undertaken massive restructuring exercise in recent months, which has helped them show lower bad debt.

Data collated by the finance ministry for a meeting of bank chiefs on Thursday reveals that in case of at least five state-run lenders, the ratio of assets which have turned non-performing or have been restructured is as high as one-fifth of their loan book.

By restructuring debt — through conversion into equity, extension of repayment period and other changes —banks have managed to ensure that these loans don't turn sticky. For instance, in case of Dabhol Power, banks have converted a part of their loans into equity and deferred immediate provisioning to report healthier finances although the company is not earning any revenue and therefore unable to pay installments.

So, Central Bank of India's gross NPA level may be 6.25% at the end of September, but if you look at the ratio of restructured loans and NPAs, it adds up to close to 20.5%. For the entire public sector banking segment the level is around 12.6%, when gross NPAs are 5.3% of the loan portfolio.

The prolonged economic slowdown has resulted in companies facing earning pressure, resulting in loan defaults. Among the various sectors, SMEs are at the top of the heap with 7.2% of the loans turning NPA, followed by large corporates at 5.55%. Despite the perceived stress, real estate is performing better with 1.8% of the loans turning sticky.

At 14.2% of the loans, the highest level of NPA is in the gems and jewellery space, where export demand has been hit by the slowdown in the US and Europe. Then come coal, a sector which is in the grip of controversy, and cement, which has been hit by excess capacity.

 

Saradha scam: Major embarrassment for Mamata as CBI arrests TMC MP Srinjoy Bose-IBN

 

Kolkata: In yet another blow to the ruling Trinamool Congress, party MP Srinjoy Bose has been arrested by the Central Bureau of Investigation in connection with the multi-crore Saradha chit fund scam.

Bose, who owns Bengali daily Sambad Praitidin, allegedly had stuck a deal with Sudipta Sen, the main accused in the Saradha scam. He is being probed for criminal conspiracy and misappropriation of funds, said CBI sources.

Bose was seen entering the CBI office around 11 am and after 6 hours of grilling, his arrest was confirmed only at around 4:30 pm. His arrest is being considered as the biggest in the case. He has been questioned by the CBI sleuths twice earlier also

The ED has frozen five bank accounts of Bose, of which three are personal and two are that of the company's. It has also begun the process of attaching Samvad Pratidin, the Bengali daily owned by Srinjoy Bose.

The CBI has also summoned TMC MP Hasaan Ahmed Imran for questioning in the case.

Under fire, the TMC has called CBI "political manipulated". Speaking to CNN-IBN, party MP Sougata Roy lashed out at the CBI as he said, "Srinjoy Bose's arrest is unfortunate, CBI is politically manipulated. TMC as a party remains strong."

Party chief Mamata Banerjee has demanded the arrest of the guilty. She said, "Why is the CBI not catching the real culprits of the Saradha scam? They should arrest those who are actually responsible of cheating poor people."

Another party MP Derek O' Brien tweeted, "The CBI is a political tool used by the previous government to settle political scores. Now the BJP is doing an action replay. They cannot combat the Trinamool politically. They have tried and failed. So what do they do? Let loose a discredited CBI."

The ED has also frozen two bank accounts held by painter Shubhaprasanna, a close aide of CM Mamata Banerjee. It has also frozen as many as 24 fixed deposits held by the painter. His possible involvement in the scam is under the scanner of the central probe agencies.

Bose's arrest comes on a day when another Trinamool leader Shyama Prasad Mukherjee was grilled by the CBI. West Bengal Transport Minister Madan Mitra was also asked to turn up for questioning but he didn't and checked himself into a Kolkata hospital.

Former Trinamool Congress MP Kunal Ghosh, one of the prime accused in the scam, attempted suicide in the Presidency prison in Kolkata last week demanding the arrest of the guilty.

Seven high profile arrests have been made in the case as of now. It includes Sudipta Sen, Debjani Mukherjee, ex-TMC MP Kunal Ghosh, ex-DGP,West Bengal, Rajat Majumdar, East Bengal Club official Debabrata Sarkar, Sadanand Gogoi who is a singer from Assam and businessman Sajjan Agarwal, other than Srinjoy Bose.

Mamata Banerjee had earlier in the month claimed that nobody from her party had taken money from chit fund-aided companies, and hit out at a section of the media for showing Trinamool leaders as "thieves".
http://ibnlive.in.com/news/saradha-scam-major-embarrassment-for-mamata-as-cbi-arrests-tmc-mp-srinjoy-bose/514077-37-64.html

SUpreme Court Rejects Claim Of Bank

Sugar-coated political risk hits public banks-LiveMint--By Ravi Ananthanarayanan

After the SC rejecting appeal against an HC order directing sugar mills to sell stocks to repay cane farmers, banks will suffer as they may fall short on collateral

 

In India, political risk is not only impeding business but also spilling over to the financial institutions. On Monday, the Supreme Court rejected an appeal against an Allahabad high court order directing sugar mills to sell stocks to repay cane farmers.

 

Banks had argued they had first charge over sugar stocks and they should be used to repay the loans taken by the mills. The apex court observed, according to a news report on the Times of India website, that the cane growers’ right to life is more important than the banks’ right to carry on business. That is no doubt a humane way of looking at things, but also presents a rather chilling prospect for banks and their ability to ring-fence their collateral.

 

A fundamental question that arises is whether a financial institution’s interests will now be secondary to public interest, even if the business in question is reliant on loans. Claims of shareholders, for instance, are secondary to creditors. But now, one more element of public interest may have been added to this equation.

 

Of course, this observation is specific to this case. And, this case itself has some peculiarities. It results from a public interest litigation (PIL) filed to ensure that mills pay farmers’ sugarcane arrears. They were asked to pay the dues to farmers by 31 October by selling stock. The high court said that the mills were not disputing the liability but banks were opposing the move.

 

Now, sugar mills operate on a long working capital cycle, being a seasonal business, and raising bank funds is common practice. Under Uttar Pradesh state law, mills are allowed to borrow money against their sugar stocks but on condition that a percentage of these loans are used to settle dues to sugarcane farmers. The judgement mentions that up to 85% of the stocks should be earmarked for payment of the farmers’ dues by the mills. however, farmer dues remained uncleared, prompting a PIL. The high court asked mills to sell the stock to repay farmers, but banks objected. Their contention was that their loans entitle them to a first claim over the stock.

 

But the high court clarified that if the arrears due to farmers are already tagged on to the sugar inventory, then banks cannot have a prior claim. But note that the court did not go into allegations of whether funds were diverted by the mills. Normally, they should have used these loans to repay farmers, freeing the stocks of any claims. The high court order even clarifies that once the arrears are cleared, the bank’s right over the stock is restored. Banks now need to enquire why mills did not use their loans to clear arrears, and whether any action can be taken against them. If mills had cleared dues, then the stocks would have been available as valid collateral.

 

What are the implications of this case? In the near term, banks are sufferers as they may fall short on collateral. Sugar mills are relatively unaffected, except that large sales of sugar will keep prices down. In the medium term, banks may become wary of lending to Uttar Pradesh sugar mills. Or, they may put in a foolproof mechanism to ensure that no arrears remain on inventory that is held as collateral.

 

But the mess in the Uttar Pradesh sugar industry continues. The state government succeeded in not only imposing a high state advised price but also cleared arrears of the current season. Earlier, mills typically carried over dues into the next season. That is going to see both the state government and farmers unlikely to back down in the current sugar season as well. Expect fireworks in the coming months.

 

Banks should have ensured that their loans were collateralized properly. However, they also need to become prudent about lending to sectors where government interference is high, and where public and private interests often clash. More importantly for state-owned banks, the ones affected in this case, succumbing to political pressure in lending can be hazardous for their health.

 

http://www.livemint.com/Money/FX5lCLYQgTQtXoXsgVgZgM/Sugarcoated-political-risk-hits-public-banks.html

 

Right to life overrides right to do business, Supreme Court rules

NEW DELHI: Right to life outweighed right to do business with the Supreme Court on Monday rejecting State Bank of India's petition challenging an Allahabad high court order directing sugar mills in Uttar Pradesh to sell the sugar stock hypothecated to SBI against loans to pay sugarcane farmers' dues.

Sugar mills had taken loans totaling Rs 3,000 crore from SBI by hypothecating their sugar stock. Under law, the creditor bank has the first right on the hypothecated sugar to realize its dues if the mills default on repayment of loans.

Acting on a PIL filed by Rashtriya Kisan Mazdoor, the HC had invoked Section 17(5) of UP Sugarcane (Regulation of Supply and Purchase) Act, 1953 and extinguished the right of secured creditors and directed collectors to grant permission to sugar mills to sell the sugar stock for payment of dues to cane growers.
Appealing against the HC order through advocate Sanjay Kapur, SBI told the SC on Monday that the mills were now disposing of sugar stock, which was a security against loans. SBI apprehended that the Rs 3,000 crore loans it had advanced to mills would turn non-performing assets.

SBI also said the HC order for disposal of sugar stock could potentially turn sugar mills sick as it would proceed under the coercive Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act to sell the mills' assets to recover its dues.




It also said no bank would come forward to grant any advance/loan to these sugar mills in case it was held that first charge on sugar stock would be in favour of cane growers and not banks, as held by the HC.

A bench headed by Chief Justice H L Dattu felt the cane growers' right to life was more important than the bank's right to carry on business, especially in the face of hardships faced by farmers leading to many suicides.

"In view of the suicides among farmers, let us put a quietus to this," the bench observed before dismissing SBI's appeal.

Similar considerations had weighed with the court in dismissing the appeals filed by four public sector insurance companies on settlement of claims filed by ​Jammu & Kashmir flood victims. The court had refused the insurance companies' plea to conduct preliminary survey before settling claims.

The SC asked them to implement the HC order, which had directed them to pay up 95% of the claim amount if the insurance cover was below Rs 25 lakh and 50% for those with insurance cover exceeding Rs 50 lakh.

In the recent past, SBI has been at the receiving end also due to scams. Close on the heels of NPAs after cancellation of 2G spectrum licences by the apex court, it suffered a jolt when the SC cancelled all coal block allocations to private companies, which had taken huge loans from SBI.

The Coal Producers Association had informed the court that loans worth Rs 2.5 lakh crore advanced by banks and financial institutions would become non-performing assets because of en masse cancellation of coal blocks. It had said that SBI might suffer the biggest jolt as it could suffer a hit of up to Rs 78,263 crore, which was almost 7.9% of its net worth for 2012-13.
Banks give over Rs 4,000 crore interest-free loans to sugar mills-ET 27th June 2014

Banks have so far disbursed over Rs 4,000 crore interest-free loans of the total Rs 6,600 crore approved by the government to cash-starved sugar mills for clearing dues to cane farmers.

In December, the Cabinet Committee on Economic Affairs ( CCEA) had approved Rs 6,600 crore interest-free loans to the sugar industry exclusively for clearing sugarcane arrears. It decided to give loans via banks equivalent to the excise duty paid by the mills in the past three years.

"As on June 3, banks have disbursed Rs 4,072 crore interest-free loans to sugar mills," a senior Food Ministry official told PTI.

Of which, Rs 1,412 crore and 1,461 crore have been disbursed to mills located in Maharashtra and Uttar Pradesh, the country's top-two sugar producing states, he said.
Banks have been given June-end as deadline for sanctioning the entire loan amount. The total interest burden, estimated at Rs 2,750 crore over the next five years, is being borne by the government.

Mills have to repay the loans in five years and can avail of a moratorium on repayment for the first two years.

The Rs 80,000-crore sugar industry has been facing a cash crunch due to higher cost of production and lower selling prices in the wake of surplus output over the past few years.
Currently, sugarcane arrears stand at about Rs 11,000 crore across the country, with the maximum of Rs 7,200 crore in Uttar Pradesh.

Amid concerns over rising cane arrears, the Food Ministry is also examining providing additional interest-free loans of Rs 4,400 crore to sugar mills to clear dues to cane farmers.

It is also looking at hiking sugar import duty from 15 per cent to 40 per cent to curb cheap imports and increase ethanol blending in petrol to 10 per cent as an effort to improve the liquidity of mills.

Fraud Cases Cannot Be Quashed

Cases of Financial Frauds shall not be quashed on the ground of Compromise as it is a social wrong and it has immense societal impact: Supreme Court [Read the Judgment]

Hearing an appeal filed by State of Maharashtra against the judgment of the Bombay High Court, the Supreme Court held that High Courts should not quash FIR in cases of financial frauds where public is at a loss, even if there is a settlement.

 

The judgment written by Justice Dipak Misra, relied on the judgment delivered by the Supreme Court in CBI v Jagjit Singh [(2013) 3 SCC 686]“wherein  the  court  being  moved  by  the  CBI  had overturned the order of the High Court quashing the criminal proceeding  and  in  that  backdrop  had  taken  note  of  the  fact that accused persons had dishonestly induced delivery of the property  of  the  bank  and  had  used  forged  documents  as genuine.”

 

The present case arose when a case was registered after written complaint by the Chief Vigilance Officer, Bank of Baroda in 2006. Investigation revealed that a bank officer was involved in fraud and case under Section 120-B, Section 406, 20, 467, 468 and 471 IPC were registered against him and other accused persons.

 

The charge sheet that had been filed by the investigating authority also states that some persons made applications to Bank of Baroda for sanction  of  various credit  facilities,  stating  that  they  wanted  to  induct  the  said bank  as  a  new  consortium  member  to   replace  the  existing members, namely, the UTI Bank and the Federal Bank. They requested the said Bank to sanction 15% of the total Working Capital  facility  sanctioned  by  the  consortium  of  Banks,  so that, that much amount could be transferred to the UTI bank and Federal Bank to take over the existing liabilities with the said two banks.

 

Further investigation revealed that “account of the company, with the consortium of banks as well as the finance institutions, was highly irregular. In the application to the Bank, the accused persons concealed the fact relating to the dues outstanding against them. Thereafter,  when  asked  for  the  outstanding position  with  the  existing  consortium  members,  the  accused persons  wilfully and  with  the  criminal  intent to  mislead  the Bank  of  Baroda,  furnished  wrong  statements  about  the outstanding position by giving considerably lesser amount as outstanding than the actual.”

 

Meanwhile, while the case was pending, the accused Vikram Doshi,settled  the  disputes  and  paid  Rs.42  lacs  for  settling  the dispute. On that basis, Kotak Mahindra Bank issued a “no due certificate”.The said bank also confirmed that the guarantees issued by Vikram Doshi stood discharged.

 

After getting the no dues certificate, the accused approached the High Court under S. 482 of the Code of Criminal Procedure, and court ordered “Both the offices under Sections 406 and 420 are compoundable with the permission of the court. As already discussed here in above, the Bank has already given its No Due Certificate to the borrower i.e. ATCOM. It  can clearly be seen that even if the matter  is  permitted  to  go  for  trial,  no  fruitful purpose  would  be  served,  except  burdening  the criminal Courts which are already over-burdened.”

 

To arrive at the same conclusion the High Court relied on the decision in Madan Mohan Abbot v. State of Punjab and distinguished the pronouncement in A. Ravishanker Prasad case.

Then State then preferred an appeal to the Apex Court.

 

Additional Solicitor General Pinky Anand submitted to the Court that High Court had erroneously opined that the remaining offences are 406  and  420  of  IPC  whereas  the  charge sheet,  also  included other  offences  against  the  accused  persons. On the other hand, the counsel for the respondents claimed that the order of the High Court was correct.

 

Stating the point of law clearly, the judgment of the Supreme Court noted, “High  Courthas  the  jurisdiction  to  quash  a  criminal  proceeding  under Section  482  of  the  Code  in  respect  of  non-compoundable offences barring certain nature of crimes.”

 

The Court then went through plethora of judgments on the issue, stating finally, “Be it stated, that availing of money from a nationalized bank in the manner, as alleged by the investigating agency, vividly exposits fiscal impurity and, in a way, financial fraud.   The modus operandi as narrated in the chargesheet cannot be put in the compartment of an individual or personal wrong. It is a social wrong and it has immense societal impact. 

 

  It is an accepted principle of handling of finance that whenever there is manipulation and cleverly conceived contrivance to avail of these kind of benefits it cannot be regarded as a case having overwhelmingly and predominantingly of civil character.  The ultimate victim is the collective.   It creates a hazard in the financial interest of the society.   The  gravity  of  the  offence creates  a  dent  in  the  economic  spine  of  the  nation.   The cleverness  which  has  been  skilfully  contrived,  if  the allegations  are  true,  has  a  serious  consequence.

 

  A crime of this nature, in our view, would definitely fall in the category of offences which travel far ahead of personal or private wrong. It has the potentiality to usher in economic crisis.   Its implications  have  its  own  seriousness,  for  it  creates  a concavity  in  the  solemnity  that  is  expected  in  financial transactions.    It  is  not  such  a  case  where  one  can  pay  the amount and obtain a “no due certificate” and enjoy the benefit of quashing of the criminal proceeding on the hypostasis that nothing  more  remains  to  be  done.   The  collective  interest  of which the Court is the guardian cannot be a silent or a mute spectator to allow the proceedings to be withdrawn, or for that matter yield to the ingenuous dexterity of the accused persons to invoke the jurisdiction under Article 226 of the Constitution or under Section 482 of the Code and quash the proceeding. It is not legally permissible.”

 

Stating the role of judiciary while dealing with such cases, the judgment states, “The Court is expected to be on guard to these kinds of adroit moves.   The  High  Court,  we humbly remind, should have dealt with the matter keeping in mind  that  in  these  kind  of  litigations  the  accused  when perceives a tiny gleam of success, readily invokes the inherent jurisdiction  for  quashing  of  the  criminal  proceeding.   The court’s principal duty, at that juncture, should be to scan the entire facts to find out the thrust of allegations and the crux of the settlement.

 

It is the experience of the Judge comes to his aid and the said experience should be used with care, caution,circumspection and courageous prudence.  As we find in the case at hand the learned Single Judge has not taken pains to scrutinize the entire conspectus of facts in proper perspective and quashed the criminal proceeding.   The  said  quashment neither helps to secure the ends of justice nor does it prevent the abuse of the process of the Court nor can it be also said that as there is a settlement no evidence will come on record and there will be remote chance of conviction.

 

Such a finding in our view would be difficult to record. Be that as it may, the fact remains that the social interest would be on peril and the prosecuting agency, in these circumstances, cannot be treated as an alien to the whole case.  Ergo, we have no other option but  to  hold  that  the  order  of  the  High  Court  is  wholly indefensible.”

The Court allowed the appeal filed and the order of the High Court was set aside.

 

http://www.livelaw.in/cases-financial-frauds-shall-quashed-ground-compromise-social-wrong-immense-societal-impact/