CBI probing Rs 20-cr case against Chhabria

Directors of NEL named in the FIR are Shyam Bhatia, K N Malhotra, R K Kutty and S Pandit. Among the top bank officers who allegedly colluded are P S Deshpande, then CMD, Bank of Maharashtra, R K Gupte, then Executive Director and S M Chitnis, then GM, Operations. Orson Electronics Limited (OEL) and Orson Distribution Private Limited (ODPL), also promoted by Chhabria, are the group concerns named.

According to the FIR filed by the Bank Securities and Fraud Cell of the CBI last year, several officers of the Bank of Maharashtra connived with the accused to extend credit facilities to the companies without verifying the claims of the companies. The alleged fraud was carried out during 1986-87.

Most of the amount was apparently credited through drawee bill limit (DBL) facility, (similar to bill discounting) with one company drawing on another. According to the FIR, V B Gandhi, then deputy general manager, sanctioned DBL of Rs 2 crore and cash credit limit of Rs 50 lakh to ODPL against hypothecation of stock in April 1986. Bills were to be drawn by OEL and accepted by ODPL.

This limit was later raised to Rs 4 crore.

Since a huge credit facility was also granted by Canara Bank and Bank of India to OEL, the Reserve Bank of India wanted Bank of Maharashtra to get letters from these banks to the effect that they had correspondingly reduced the limits to OEL.

Since Bank of Maharashtra failed to get these letters, the apex bank ordered that the Rs 4 crore limit be discontinued.

While the bank officers carried out this direction, they allegedly connived in June 1987 with directors of OEL to recommend the conversion of DBL of Rs 4 crore to cash credit limit.

The FIR further alleges that the then CMD of Bank of Maharashtra, P S Deshpande, allowed this despite that fact that in September 1986, the manager of Bank of Maharashtra, Nariman Point branch, had informed D P Kanvinde, deputy General Manager, Bombay Metropolitan Zone, that in its confidential report, Canara Bank (Nariman Point branch) had informed that (its own) dealings with ODPL were not satisfactory.

Further, in September 1987, S M Chitnis, then GM, operations, allegedly allowed in-land Letter of Credit limit of Rs 3 crore to ODPL without the powers to do so.

The FIR also says that though NEL had not started manufacturing activity, D P Kanvinde recommended the sanction of LoC of Rs 2 crore without margin, and cash credit limit of Rs 50 lakh with hypothecation of stocks for 25 per cent margin to NEL.

On June 25, 1987, Sardeshpande, officiating DGM, recommended enhancement of LoC limit from Rs 20 crore to NEL, though the permissible limit was only Rs 12 crore, the FIR adds.

Officers of the bank allegedly presented unverified contentions of the company to the Board of Directors of the bank for securing approval of the board for limits allowed, and the sanctions continued even though there were outstanding liabilities beyond the limit.

NEL and ODPL were charged with diverting funds taken from the bank in this manner to the account of OEL. The outstanding liability of NEL on March 31, 1990 was Rs 16.56 crore, and that of ODPL was Rs 4.08 crore.