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Informist, Thursday, Jul 18, 2024

 

NEW DELHI – The Delhi High Court has ordered a stay on IDBI Bank's directive to declare former Punj Lloyd Ltd's chairman and managing director Atul Punj's account as fraud till the next date of hearing. The high court has issued a notice to ICICI Bank and has listed the matter on Sep 17.

 

"However, the respondent(bank) shall be at liberty to file a report with the RBI (Reserve Bank of India) as also with the CBI (Central Bureau of Investigation)/Police for initiation of appropriate proceedings against the petitioner (Atul Punj) in accordance with law," said the court. If the bank decides to review their decision in view of the court's findings, then liberty will be given to Atul Punj by giving an opportunity of hearing to him and to take appropriate decision in accordance with law.

 

The high court has noted that according to the Reserve Bank of India master directions, an individual bank was entitled to get the accounts of the corporate borrower examined and audited independently, and it can certainly reach a different conclusion with regard to the status of the accounts of the corporate borrower and thereby, could "red flag" the same. However, the remedy is only to report the fraud to the RBI within 20 days of detection and also report the matter to the Central Bureau of Investigation or the police for criminal action, the court said.

 

"A careful perusal of the aforesaid RBI directions brings out that the individual bank has no jurisdiction to unilaterally declare the account as 'fraud' in the absence of consent accorded by the member banks in the consortium who have given more than 60% of the lending," said the court.

 

The high court was hearing a petition by Atul Punj against IDBI Bank's Jul 5 order to declare his account as fraud in respect of loans taken by Punj Lloyd. The petitioner said that the process to declare banking transactions or accounts as fraud could only be based on the majority rule of agreement among the banks with at least 60% share in the total lending. The petitioner said that in a meeting by all the lenders of Punj Lloyd, a consortium of 29 member banks had found nothing wrong, in which 61.16% of the banks found that "no fraud" was committed by the petitioner and the other promoter directors while 21.09% were yet to take any decision. The IDBI Bank said that the bank, in its individual capacity, is not precluded from conducting an independent enquiry and came to a different conclusion than the one reached by other member banks of the consortium.

 

At 1224 IST, shares of IDBI Bank were trading 5.7% higher at 92.85 rupees on the National Stock Exchange.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Surya Tripathi

Edited by Deepshikha Bhardwaj

 

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