‘Hotel grab’ linked to Chidambaram kin: Why CBI probe has hit a wall 8 years on

Complainant K Kathirvel had approached CBI alleging that Indian Overseas Bank officials auctioned ‘The Comfort Inn’ at a lesser price & sold it to P Chidambaram's sister-in-law.

CBI had initiated the preliminary enquiry into the charges in September 2017 | Manisha Mondal | ThePrint

New Delhi: The Central Bureau of Investigation (CBI) has conceded to the Delhi High Court its inability to register a criminal case in connection with the alleged forceful takeover of a Tiruppur hotel by the kin of Congress senior leader P.Chidambaram.

The agency stated that it was unable to register a case because the Indian Overseas Bank (IOB) has denied sanction to prosecute its employees, who are named as accused in the complaint and the preliminary enquiry.

Under Section 17A of the Prevention of Corruption Act (PCA), public servants are granted protection from any inquiry into their discharge of official duties. Prior permission is required from authorities before such a probe can be initiated.

The submission was made last week after K.Kathirvel, who ran the hotel in partnership with his associates, moved a fresh writ petition urging the HC to register a case against the accused, including the IOB officers.

Kathirvel had approached the CBI in September 2016 and in April 2017, alleging that the IOB officials at the Salem regional office had auctioned ‘The Comfort Inn’ at a lesser price and sold it to Chidambaram’s sister-in-law Padmini Sivasubramaniam.

Based on his complaints, the CBI had initiated the preliminary enquiry (PE) in September 2017 and had informed the HC about about conclusion of its PE in May 2019.

“In view of the above declining of the mandatory approval under Section 17 (A) of the PCA Act, the CBI is not in a position to initiate investigation against D. Palanisamy, the then manager, Tiruchengode branch, Namakkal (retired); A. Mani, the then authorised officer, regional office, Salem; S. Palanivel, senior manager (law) (now chief manager), Namakkal,” the CBI stated.

ThePrint has a copy of the CBI’s affidavit.

Kathrivel’s counsel Yatinder Chaudhary argued that since the PE was instituted before the introduction of Section 17(A) through an amendment in 2018, the FIR could be filed even without a sanction.

The Delhi HC will now hear the matter on 19 November.

PE findings

The PE, according to the CBI, found that the IOB sanctioned a term loan of Rs 2.97 crore to The Comfort Inn in August 2005.

The firm missed payment of EMI amounting to Rs 19.42 lakh for three consecutive months. The bank issued a notice in February 2007, followed by the loan account marked as a Non-Performing Asset (NPA) in March 2017. It issued another demand notice as the due amount shot up to Rs 23.73 lakh by May that year.

The public sector bank took symbolic possession of the hotel on 25 October under provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and initiated the auction process.

But it was found that the IOB had already valued the property on 9 October, before taking the symbolic possession in violation of the bank’s circular, the CBI alleged. The bank fixed the reserve price at Rs 4.16 crore as per the open market value and fixed the date of auction on 6 December, 2017.

After the auction was over, the CBI submitted, Kathirvel paid Rs 65 lakh overdue in the loan account on the advice of bank officials. The payment was accepted despite the culmination of the auction process in violation of the SAFAESI Act, it added.

“The bank received Rs 65 lakh tendered by the firm even after the auction proceedings, which is expressly barred under Section 13(8) of the SARFAESI Act. Thus, the bank indicated to the borrower that the loan account is technically regularised. The auction proceedings and receiving dues tendered by the borrower cannot go simultaneously, but the bank acted in that fashion,” the affidavit said.

Additionally, the CBI submitted that the Madras HC had junked Kathirvel’s plea to quash the notice issued by the bank, but had instructed it not to confirm the sale of the property.

But the auction was held and Sivasubramaniam emerged as the highest bidder with a bid of Rs 4.5 crore. Chidambaram was the Union finance minister at that time.

Kathirvel then moved a tribunal to stop the sale and secured an interim stay, a move that was challenged by Sivasubramaniam in the Madras HC.

On 30 April 2008, the HC set aside the tribunal order and days later, Kathirvel informed the bank about an inevitable appeal before the Supreme Court. Even as the apex court was to hear the case on 6 May, the bank allegedly confirmed the sale to Sivasubramaniam just a day before the hearing.

“That the bank officials were more interested in disposing the property in favour of the successful bidder, Padmini Sivasubramaniam. As per the valuation by K. Karthirvel, the hotel was worth Rs 7.24 crore. Hence, the bank’s valuation at Rs 4.16 crore appears to be very low,” the CBI submitted.

It added that a detailed probe was needed as preliminary enquiry found the role of bank officials in the entire process. However, the IOB denied extending the sanction order in March 2020, citing no lapses by its officers.

(Edited by Tony Rai)