Court Orders CBI Probe into Rs. 1300 Crore Bank Fraud in 7 Banks

In a shocking case of alleged collusion between banks and a corporate defaulter, the Allahabad High Court has ordered the Central Bureau of Investigation (CBI) to probe how seven banks extended multiple loans totaling Rs. 1300 crore to Simbhaoli Sugars despite its history of loan defaults.

Highlights of the Court’s Order:

• Modus Operandi: Simbhaoli Sugars is accused of using the same tactics to fraudulently secure loans from all seven banks: State Bank of India (SBI), UCO Bank, ICICI Bank, Oriental Bank of Commerce, Punjab National Bank, Bank of India, and Bank of Baroda.
• Ignoring Rules and Due Diligence: The banks allegedly disregarded RBI guidelines and internal procedures for loan disbursement, approving large sums without adequate security or proper scrutiny of Simbhaoli Sugars’ financial health.
• Public Money Siphoned Off: The Court expressed concern that almost Rs. 1300 crore of public money has been misappropriated, with Simbhaoli Sugars failing to repay even a portion of the loans or settle dues with sugarcane farmers.
• Lack of Action by Banks: Despite declaring Simbhaoli Sugars’ accounts Non-Performing Assets (NPAs), the banks allegedly took no effective steps to recover the outstanding amount.
• Suspicion of Forgery and Money Laundering: The Court questioned the authenticity of documents submitted by Simbhaoli Sugars and noted the absence of mandatory reporting of the fraud to the “Banking Security and Fraud Cell” of CBI, raising concerns about potential money laundering activities.

CBI Investigation Ordered:

To comprehensively investigate the case, the Court directed the CBI to:

• Investigate how each bank violated RBI guidelines and internal procedures in sanctioning loans to Simbhaoli Sugars.
• Probe the roles of bank officials involved in approving and disbursing the loans, as well as those who failed to recover the dues.
• Explore the possibility of money laundering under the Prevention of Money Laundering Act, 2002, and collaborate with the Enforcement Directorate if necessary.

Additional Directives:

The Court also:

• Instructed Simbhaoli Sugars to cooperate fully with the CBI investigation.
• Urged the authorities to trace the missing funds and identify where they were diverted.

Conclusion:

This landmark order highlights the critical role of regulatory bodies and due diligence in preventing bank frauds. The CBI investigation is expected to shed light on the complexities of the Simbhaoli Sugars case and hold accountable those responsible for the alleged embezzlement of public funds.