New Delhi: The Madras High Court Monday quashed the Central Bureau of Investigation’s (CBI) case against a family firm of Tamil Nadu cabinet minister K.N. Nehru, noting that the firm and the Indian Overseas Bank had reached an amicable settlement over a loan transaction.
The court was deciding on two petitions moved by N. Ravichandran, his firms, True Value Homes India and TVH Energy Resource, and group company Truedome EPC India and its office-bearers, seeking quashing of the CBI’s case and chargesheet against them in a matter of alleged fraud relating to a Rs 30 crore bank loan.
Ravichandran is the younger brother of Nehru, the municipal administration, urban and water supply minister in the M.K. Stalin-led DMK government.
The court agreed to the CBI’s argument that there was “deception” in the way Truedome EPC India made representation before Indian Overseas Bank to seek loan and later transferred the entire loan amount to its group concern, True Value Homes, within hours of disbursal.
However, it observed that since bank officials were from the beginning aware of usage of loan amount to repay another loan from a separate bank, the case was tilted more towards a “commercial consideration” and did not demonstrate any “serious offence against society”.
The court imposed a cost of Rs 30 lakh on the petitioners and ordered them to pay within eight weeks of receiving a copy of the order. The amount was ordered to be split between the CBI, to cover its prosecution costs, and the court, for purchasing stationery and infrastructural materials for district centres and taluk sub-centres.
The counsel of Ravichandran, comprising advocates Vijay Narayan, Aparajitha Vishwanath and Abishek Jenasenan, argued before the court that the CBI’s case should be quashed because the bank had received a full and final settlement of the loan amount and was not claiming any outstanding amount.
“There is no evidence that the petitioners conspired with or paid any quid pro quo to any of the bank’s officials, and the bank did not file any complaint against its officers. Nor did the CBI uncover any evidence against public servants; only the companies and their directors are prosecuted for offences under Section 120(B) read with 420 and 420 of IPC, with the only non-compoundable offence being 120(B) of IPC,” Justice D. Bharatha Chakravarthy observed in the order.
The CBI had booked Chennai-based Truedom EPC India and its directors under Sections 420 (cheating), 120-B (criminal conspiracy) of the Indian Penal Code and relevant sections of the Prevention of Corruption Act. The FIR was filed based on a complaint of Indian Overseas Bank, which alleged that Truedom had caused it a loss of at least Rs 22.48 crore as on 30 June, 2021, by diverting the loan amount of Rs 30 crore to its sister concerns.
“After weighing all the facts, the balance would tilt in favour of accepting the petitioners’ prayer by quashing the case based on an amicable settlement of the dues to the bank. The Enforcement Directorate also did not record any other allegations, and the learned counsel adopted only the objections raised by the prosecution,” the judge noted.
“Since the entire loan amount was used to repay the loan of the group company to another bank on the same day, and it is clear that bank officials were aware of this from the start, with another bank realising the amount due, this tilts the case more towards a commercial consideration and does not demonstrate a serious offence against society,” the order added.
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A look at the case
The matter can be traced to December 2021, when Indian Overseas Bank wrote to the CBI, alleging a loss to the bank due to diversion of Rs 30 crore loan furnished to Truedom.
The bank alleged that Truedom was given a term loan of Rs 30 crore in March 2013 for setting up a 100.80-megawatt wind energy production project in Tiruppur district. The firm, it said, further diverted these funds to Ecodom Power, Mark Green Developers and Balaji Traders to the tune of Rs 13.50 crore, Rs 12.50 crore and Rs 4 crore, respectively.
None of these firms had any real business, and the loan amount was ultimately pooled into the bank account of True Value Homes and used to repay another loan from Punjab National Bank on 30 March, 2013, the day of disbursal, according to the prosecution.
The matter escalated to the level of a criminal case when the loan given to Truedom became a non-performing asset.
The bank wrote to the company in November 2019, asking it to settle the outstanding loan amount of Rs 31.5 crore in two instalments: the first of Rs 21.50 crore on or before 15 December, 2020, and the second of Rs 10 crore on or before 15 January, 2021, according to court documents.
The bank dispatched another one-time settlement proposal for Rs 33.42 crore, including Rs 1.91 crore of delayed interest to be paid on or before 30 September, 2021, after the firm failed to oblige the earlier proposal of the bank.
The company, however, paid only Rs 8.34 crore of the settlement amount on time, triggering a complaint to the CBI by the bank management.
Based on the complaint, the CBI booked Trudeom EPC India and its two directors on 24 December, 2021, under Sections 420 and 120-B of the IPC, as well as relevant sections of the Prevention of Corruption Act. During the investigation, the firm paid the bank Rs 25.08 crore, including delayed payment interest, on 11 May, 2022.
It also made an additional payment of Rs 37 lakh, calculated by the bank as belated payment interest, on 23 February, 2023, securing a no-objection certificate stating that the loan was cleared entirely.
The CBI, meanwhile, continued its investigation and filed a chargesheet in August last year against the accused firms and their directors, including Ravichandran.
Taking cognisance of the CBI’s case, the ED also registered an Enforcement Complaint Information Report (ECIR), its equivalent of an FIR, against the same accused and carried out raids in April this year at 12 locations linked to Nehru and his MP son, Arun Nehru.
(Edited by Nida Fatima Siddiqui)
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