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Under scanner of probe agencies, Sterling Group yet to be named wilful defaulter by many banks

When the Reserve Bank of India (RBI) took up the matter with Indian Overseas Bank (IOB), the latter informed it had initiated action for classifying the account as wilful defaulter but had kept the same in abeyance due to receipt of a one-time settlement (OTS) proposal.

Written by George Mathew , Khushboo Narayan | Mumbai | Updated: August 24, 2020 4:47:26 pm
UAPA, UAPA act, UAPA umar khalid, UAPA cases in india, UAPA cases data, what is UAPA act, UAPA chargesheet, indian expressIn these cases, 3,974 people were arrested: 999 in 2016, 1,554 in 2017 and 1,421 in 2018. (File)

The slow pace in the recovery of loans has come to the spotlight with some banks not reporting the wilful default by Gujarat-based Sterling Biotech Group to credit information companies (CICs).

Sterling Group is one of the largest corporate loan defaults involving about Rs 15,600 crore. The number will go up if the amount claimed by operational creditors is taken into account. Banks are required to file details of all defaults to CICs under the CIC (Regulation) Act. While many banks including Bank of India and IDBI Bank have declared the account as wilful defaults, some banks have not done so even after six-seven years.

When the Reserve Bank of India (RBI) took up the matter with Indian Overseas Bank (IOB), the latter informed it had initiated action for classifying the account as wilful defaulter but had kept the same in abeyance due to receipt of a one-time settlement (OTS) proposal. The borrower had not paid the amount fully to the bank and had filed an appeal before the Supreme Court seeking extension of time, on which orders are awaited, the RBI said in an RTI disclosure dated August 13.

The RBI and the Sterling Group did not respond to emails sent by The Indian Express.

As per the RBI, the matter was taken up with the bank (Punjab National Bank) vide email dated June 10, 2020, but due to inconsistency in the bank’s reply, clarification has been sought from the bank. The final status in the matter will be communicated once the response from the bank is received, the RBI said in the RTI reply to Capt Sukhpal Singh.

In the case of Bank of Baroda (BoB), the RBI said “the complaint had been taken up with BoB and is under process.” Andhra Bank (now merged with Union Bank), BoB and State Bank of India (SBI) have claimed they are parallelly pursuing a compromise settlement offer made by the group for settlement of dues in all the group accounts. Banks have now said they are planning to take the group to the Debt Recovery Tribunal (DRT) for recovery of funds and simultaneously, consider an OTS at a huge discount.

According to Union Bank, it is in the process of filing a suit in the DRT against the guarantors and borrowers for recovering dues to Andhra Bank and consortium banks. Andhra Bank earlier initiated insolvency proceedings against the company and National Company Law Tribunal (NCLT) permitted OTS, the bank said in its RTI reply.

The promoters of the group Nitin and Chetan Sandesara, who are believed to be abroad, have come under the scanner of the Enforcement Directorate (ED) for alleged money laundering of Rs 14,500 crore.

Last year, the ED filed its chargesheet in the case and alleged that loan funds were diverted for non-mandated purposes, layered and laundered through a web of multiple domestic as well as offshore entities.

The agency alleged that the Sandesaras used their employees’ names and incorporated 249 domestic and 96 offshore shell companies. According to the ED, the group was engaged in round-tripping of SBLC funds to the tune of Rs 4,500 crore by violating conditions laid by the RBI while sanctioning the loan.

The Central Bureau of Investigation too has booked Sterling Biotech, its directors Sandesara brothers, Dipti Chetan Sandesara and a few others in connection with an alleged Rs 8,100 crore bank fraud case. The OTS amount received from promoters is Rs 204 crore till date. “This is a pittance and it raises doubts about the seriousness and willingness of the borrower to repay the depositors money,” said a banker who requested anonymity.

Interestingly, banks have not made any effort till date to exercise their first ranking charge on the oil consignments from Sterling’s Nigerian oil firm SEEPCO to India. As per the RTI disclosure, Andhra Bank has not seized any oil shipments coming from SEEPCO, Nigeria to India. Although earlier loans remained unpaid to the consortium of lenders led by SBI, two guarantees were offered to SEEPCO so that it could borrow from overseas.

So far, the ED has attached Indian and overseas assets worth Rs 9,778 crore of the Sandesaras. A Delhi court is scheduled to hear the ED’s plea to declare Sandesara brothers fugitive economic offenders. In the last two months, the agency questioned senior Congress leader Ahmed Patel three times in connection with its cases against the brothers.

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