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IDBI bank officials face prosecution over ₹600 crore loan fraud case

EditorPollock Mondal
Published 2023-09-12, 01:44 a/m
IDBI
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On Monday, the Madras High Court rejected petitions filed by senior officials from the Industrial Development Bank of India (IDBI), including directors, seeking to quash criminal cases related to a ₹600 (Rs 1 crore = $120,594) crore loan fraud. The court ruled that the refusal to grant sanction for prosecution under the Prevention of Corruption Act (PCA) does not automatically protect them from prosecution under the Indian Penal Code (IPC).

The case revolves around a loan fraud committed by a group of companies owned by entrepreneur C Sivasankaran, in collusion with top IDBI officials. The bank had initially sanctioned a loan of ₹322.40 crore in 2010 to Win Wind Oy (WWO), a shell company registered in Finland. The company later declared bankruptcy due to default on payments.

In 2014, IDBI officials were accused of conspiring to sanction another loan of ₹530 crore to Sivasankaran's firms for a 'non-productive purpose', leading to significant losses for the bank and withdrawal of recovery proceedings. The Central Vigilance Commission (CVC) filed a complaint, leading to the Banking Securities Fraud Branch (BSFB) of CBI registering a case against 15 IDBI officials and others, including Sivasankaran.

Justice G Jayachandran criticized the bank officials for sanctioning an additional loan under the guise of 'restructuring' the outstanding loan as a 'prudent action', saying that this was not prudent by any stretch of imagination, especially when the said loan remains unpaid. He added that a common man would have proceeded against the corporate security for the recovery of the outstanding amount of ₹390 crore instead of providing an additional loan.

He further noted that IDBI Bank is a private banking institution where the Union government and LIC hold major shares. "Refusal to grant sanction by competent authority for prosecution under PC Act certainly cannot be an umbrella for IPC offence also," the court added. Despite the officials being exonerated in a departmental inquiry, it cannot be a reason to quash the criminal case, the judge stated.

The court directed the Central Bureau of Investigation (CBI) to proceed with the prosecution against the senior IDBI bank officials.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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