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Bad loan scam or defaulters dodging debt? The story behind former SBI chairman’s arrest

SBI ex-chair Pratip Chaudhuri has been accused of ‘conniving’ with asset reconstruction firm to wrongly declare a loan NPA, and sell property worth Rs 200 crore for Rs 25 crore.

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New Delhi: The case in which former State Bank of India (SBI) chairman Pratip Chaudhuri was arrested earlier this week centres on a hotel project in Jaisalmer dating back 14 years. 

SBI sanctioned a loan of Rs 24 crore for a project of the Gaudavan Group — Garh Rajwada — in 2007. However, the project could not be completed and Gaudavan Group owner Dilip Singh Rathore passed away in April 2010, and the company allegedly defaulted on the loan.

The allegation against Chaudhuri is that he “connived” with a company named Alchemist Asset Reconstruction and “violated Reserve Bank of India guidelines” to wrongly declare the loan a non-performing asset (NPA), and sold company property worth Rs 200 crore for Rs 25 crore.

Rathore’s son Harendra Singh Rathore has pointed out that Chaudhuri, who retired as SBI chairman after a two-year term in September 2013, joined the board of Alchemist Asset Reconstruction Company (ARC) in October 2014. 

An FIR in the case lodged in 2015 was closed after Rajasthan Police filed a closure report stating that it was a “civil matter” between individuals, and no criminality on part of Chaudhuri was made out.

However, following a local court order stemming from a 2016 protest petition filed by Harendra Rathore — the current promoter of Gaudavan Group, who challenged the police action and their investigation in the case — Chaudhuri was arrested on 31 October. 

The order was issued on 12 February 2020, but execution was held up by the Covid pandemic. 

The court order, a copy of which is with ThePrint, says the accused did not follow proper procedure in the auction of the properties and did it in a “hurry”. It states that the entire process appears to be a “conspiracy” by the former SBI chairman hatched along with officials of Alchemist and SBI, to “acquire the properties”.

It further says the properties were given away at a much lower price than the reserve price and the SBI official “misused his position”. According to the court, the Gaudavan Group was declared an NPA much before time.

Chaudhuri has been charged under sections 420 (cheating and dishonesty including delivery of property), 409 (criminal breach of trust by public servant, or by banker, merchant, or agent) and 120B (criminal conspiracy) of the Indian Penal Code.

Fellow accused Alok Dhir of Alchemist ARC Friday got transit anticipatory bail from the Delhi High Court. He will not be arrested till 9 November. 

Speaking to ThePrint, Dhir said it is a case of a “chronic defaulter trying to take the system for a ride by making false allegations against honourable persons at the helm of ARCs and lenders”.

Rubbishing the allegations against Chaudhuri, his lawyer Vipin Vyas told ThePrint that all due process was followed in the auction of the properties and that there is no criminality in the case.

The SBI also said in a statement that the sale followed the laid-down process in line with the policy of the bank.

The bank said it took various steps for completion of the project as well as recovery of the bank’s dues but it did not yield the desired results. Hence, as part of the bank’s recovery efforts, the dues were assigned to an ARC for recovery in March 2014.

The statement further said the borrower was put through the Insolvency and Bankruptcy Code process by the ARC, and the asset was 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.

Also Read: Ex-SBI chairman Pratip Chaudhuri arrested in loan default case, sent to 14-day judicial custody

The ‘conspiracy’

ARCs are specialised financial institutions that take over bad debts from banks and “attempts to recover the debts or associated securities by itself”.

The Gaudavan Group’s loan was declared an NPA in June 2010.

According to the FIR filed in 2015, a copy of which is with ThePrint, in 2010 the loan was declared an NPA as part of a “conspiracy”.

“Chaudhuri basically got the company declared as an NPA and then made sure the property goes to Alchemist at a very less price. This was done with a mala fide intention of securing his retirement,” Kanwar Raj Singh, who is representing Harendra Rathore, said.

In the FIR, the complainant accused Chaudhuri of conniving with the owner of one Atishi Consultancy, Devender Jain, besides Alok Dhir, among others, to take over his properties at “throwaway prices”.

According to the FIR, in 2013, Jain met Harendra and told him that he has good contacts in the SBI and can help him get a settlement of the loan at a lower cost.

“In another meeting in 2013, Harendra was told that Chaudhuri, who was to retire from SBI, will soon join Alchemist. He was told that Dhir was close to the chairman and the loan account which was Rs 40 crore at that time (with interest), will be settled for Rs 20-25 crore,” Singh said.

“To get this matter settled, Dhir put a condition that he would charge 25 per cent as interest yearly and will also be a benefactor when the property is finally sold.

“Harendra was not willing to give that money as interest. Jain also sent Harendra an agreement and asked him to sign it and give it to Alchemist but the complainant refused,” Singh said.

The company, Singh added, kept telling them that the matter would be sorted, and a settlement reached, to no avail.

According to the FIR, after Harendra refused to sign the agreement, he received an email dated 23 December 2013 from Jain saying his consultancy along with the bank has sold his property to Alchemist for Rs 25 crore.

“The properties were not even auctioned. Harendra was told that if he doesn’t agree to terms of Alchemist, he will have to face consequences and that is what happened,” Singh said.

“As an Asset Reconstruction Company, the job of Alchemist was to revive the company and not to take it over. This is a clear conspiracy to take over properties at throwaway prices,” Singh added.

Rathore has also alleged that SBI also sold property that was not kept as guarantee.

Also Read: ED files chargesheet against Mumbai-based realtors linked to Yes Bank loan fraud

No case was made out’

The FIR filed in 2015 was probed by Rajasthan Police.

Speaking to ThePrint, a senior police officer privy to the investigation said police had “investigated the allegations against Chaudhuri” but did not find “any criminality”, following which a closure report was filed.

“We investigated the matter and found that it was a civil matter between two parties and no criminal case was made out. Hence, we filed a closure report in the matter,” the officer said.

“It is only after the complainant moved the court against the investigation saying that Chaudhuri be probed for cheating, that the court gave us an order to arrest,” the officer added.

Chaudhuri’s lawyer Vipin Vyas pointed out that the complainant filed a second FIR in Jaipur with similar allegations in 2017, but it was quashed by the Supreme Court.

“The Supreme Court heard these allegations in detail and had ordered for quashing of that FIR. The court noted that all proceedings are done in accordance with the law, and the NCLT should oversee this and it should continue under their supervision,” he added. 

“If there was a conflict of interest, or if the properties were sold as part of a conspiracy, wouldn’t the NCLT take note of this?” Vyas said. “The matter is in the court now and we are certain that this case too will be quashed soon.”

Speaking to ThePrint, Alok Dhir explained that the ARCs are licensed by the Reserve Bank of India (RBI) to acquire NPAs of defaulting borrowers. He said due process was followed by SBI for sale of its financial asset, in accordance with RBI guidelines. The bank had invited all the ARCs to submit a bid, following which the said debt was assigned to Alchemist ARC.

He added that the allegations about SBI selling properties worth Rs 200 crore for Rs 25 crore are patently false.

“We need to understand that the SBI had given a loan of Rs 25 crore. The borrower defaulted in payment of their dues. Then the bank restructured the account. But the borrower again defaulted to pay its dues. It was then declared NPA in 2010. It is only after nearly four years of making several attempts to settle the matter, the bank sold the debt of Rs 25 crore with unpaid interest to ARC for a consideration of 25 crore. In NCLT proceedings two independent valuers have assessed the value of assets at about 40 crore. Where does this number of 200 crore come from?” he asked.

Speaking about the allegations of “conflict of interest” against Chaudhuri, Dhir said the debt was assigned by SBI to ARC in 2014, six months after he retired in September 2013.

Dhir also said that the ARC tried to realise its debt after acquisition of debt, but met with stiff resistance from the borrowers.

“It is really sad that a defaulting borrower who has not paid his dues for nearly 13 years by gaming the system, and has had strictures passed against him by High Court, Supreme Court, NCLT, NCLAT, has been able to get a warrant issued against the lenders.” Dhir said.

(Edited by Sunanda Ranjan)

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