The Karnataka High Court has refused to quash a chargesheet filed by the Criminal Investigation Department (CID) against senior officers of State Bank of India (SBI) and Punjab National Bank (PNB), among other accused, over alleged fraud worth over Rs 78 crore.
The order was passed on July 23 by a Single Bench of Justice M G Uma in connection with a case filed by Prashanth Hegde, managing director of Metal Closures, which was involved in the manufacturing of packaging materials, in 2015. Several accused in the case had approached the High Court to quash the chargesheet filed by the CID.
The CID had filed a chargesheet pursuant to the company’s allegations, including removal of goods from its premises, forgery, removal of an essential LPG connection, and alleged payment of Rs 6.2 crore by a PNB executive to shell companies linked to his son, to name a few.
According to the complaint, the company ran into capital issues by the end of 2013, and its accounts were eventually declared Non Performing Assets — a loan that is subject to late repayment. The MD later stated that he came to know that the chief financial officer (CFO) and the deputy CFO of the company, along with others, had been fraudulently operating the finances of the company for several years, including by means of forging his signature.
In another complaint filed against several bank officials in 2016, it was stated that the company was funded by a consortium of banks led by SBI, along with PNB, Corporation Bank, and UCO Bank.
It was stated that since the SBI was informed about the fraud involving the employees of the company and bank executives, the bankers intended to “close down” the company by way of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act.
While dealing with the contentions by the parties, the High Court raised questions as to how the accounts were declared non-performing assets. The Bench stated, “There is also no reason as to why no action whatsoever was initiated by any of the banks to treat the account of the company as NPA during 2010 or 2011. The account statement of the company produced before the court discloses that during 2013-14, the company had repaid over Rs 100 crore to the banks. These facts do not reconcile with the contention taken by the banks with regard to the financial status of the company to treat its account as NPA.”
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The Bench also observed that an extensive investigation with documentation and witnesses had been carried out, and the case should not be quashed at this stage by conducting a “mini-trial”.
The Single Bench said, “I do not find any justification to hold a mini-trial at this stage to consider each and every contention raised by the learned senior advocates representing the petitioners and to form an opinion to reject the contentions taken by the prosecution. It is a matter for trial where both parties will have an opportunity to put forth their rival contentions.”
Having made these observations, the High Court quashed the various petitions against the chargesheet in the case.