London manager’s fraud costs BoI $82m

Refusing to accept the verdict, however, the chairman of BoI, M Venugopalan, told The Indian Express: “We have decided to challenge the ruling of the London High Court in a higher court. Our lawyers will study the verdict in detail.’’

In awarding damages of $43.2 million and accumulated interest of $39 million to BCCI’s liquidators Deloitte and Touche, Judge Nicholas Patten outlined the scheme that was hatched to defraud the depositors.

BCCI, which closed down in 1991 burning nearly a million of its customers placed six short-term deposits with BoI’s London branch between 1981 and 1985. In each case, BoI then loaned the money back to a BCCI nominee, apparently contributing to the web that ultimately bankrupted many small depositors. Such dealings allowed BCCI to show temporary improvement in its financial condition.

The judge said that BoI’s London-based manager Kamalnath L Samant knew that such transactions were being used to defraud BCCI creditors. BCCI collapsed in 1991 under a $16 billion debt.

Said Judge Patten: ‘‘It (allowing BoI to go scot-free) would allow banks such as BoI, which choose to rubber-stamp the recommendations of their senior managers without ensuring that all proper diligence has been carried out, simply to sidestep liability by relying on ineptitude.’’

In December Judge Patten had found SBI completely innocent, although it too had dealings with BCCI. ‘‘After the SBI verdict, we were too expecting a favourable judgement,’’ said Venugopalan.

Although the verdict could wipe out the bank’s entire net profit of Rs 229 crore for the third quarter ended December 2003, its chief said BoI was financially quite strong. It made a net profit of Rs 851 crore for the year ended March 2003 and its total assets were worth 76,000 crore. BoI shares the stage with some elite names. The Bank of England faces claims of $1.8 billion for its dealings with BCCI.