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HC raps banks for granting crores to firms without adequate security

Chennai: The Madras High Court slammed public sector banks Monday for granting crores of rupees as loans

without sufficient security to several firms "when people are begging for educational and farm loans".

The court's stinging observations came when it was hearing a plea filed by the State Bank of India in the Rs 820 crore debt recovery proceedings against Kanishk Gold Private Limited seeking quashing of attachment proceedings by the Enforcement Directorate (ED) against the firm .

When the petition by the SBI's Stressed Assets Management branch came up, Justice R Mahadevan posed a host of questions to the counsel for the bank.

The court said it will issue necessary orders to arrest all the officials and persons involved in the "scam."

"It is public money. The people are begging for education and farm loans after offering security.

"Do not try to safeguard the officials of the bank in this case and nobody can escape under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (also known as SARFAESI Act). We will set an example by passing order in this case to whole country," the court said.

The judge asked whether bank officers verified documents before sanctioning loan to the firm.

"What is the total amount of loan sanctioned? What is the worth of properties offered for security?" it asked.

The court directed counsel for the ED, who filed a counter affidavit, to collect details about the "involvement of officials, investigate and file a report in detail." The matter was posted for further hearing to September 17.

The counsel for the SBI submitted that there was "dereliction" of duty on behalf of the officers who investigated the case.

In its counter, the ED said: "As per the forensic audit, there are misrepresentation/falsification of records, diversion of funds and disposal of the stocks by the company."

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