Monday, September 1, 2014

CBI arrests ROC, Chennai in bribery case


Corruption















BS Reporter  |  Chennai  
 Last Updated at 20:39 IST
The Central Bureau of Investigation (CBI) has arrested Manuneethi Cholan, Registrar of Companies in Chennai, for accepting Rs 10 lakh bribe from prominent industrialist M A M Ramaswamy.

In a statement, CBI said that reliable information was received that Cholan had demanded Rs 10 lakh as illegal gratification from Ramaswamy who is Chairman of the Chettinadu Group of Companies. The statement also revealed that there was an attempt by a rival group within the management to take control over the Chettinadu Group during the annual general meeting to be held on August 27 in Chennai.

Cholan, according to CBI, demanded the illegal gratification for not approving the decision that was going to be taken at the AGM.

CBI also said the vehicle in which Cholan was travelling immediately after collection of the money was intercepted and a surprise check was conducted in the car and the bribe amount accepted by Cholan was seized.

The Honda City Sedan car in which the accused was travelling was also seized. Searches were conducted at the residence an offices of Cholan and at the office at Chettinad House in the city. Several incriminating documents and a computer hard disc were seized.

Further, an amount of Rs 20 lakh was seized from the residence of Cholan. The searches are still continuing. Cholan is being produced before the special judge court for CBI cases.

Phone calls made to Chettinad Group and Ramaswamy’s son and Chettinad Group’s Head and Managing Director M A M R Muthiah went unanswered.

Local media had come out with unconfirmed reports that Ramaswamy filed a complaint against “some family member” in a local police station stating that his life was in danger and someone was watching his house. The information could not be verified.

Ramaswamy is known to be the richest Chettiar, one of the richest communities in the country, on an individual basis and also known as Chettinad Arasar (King) and he has also been the Sheriff of Chennai for two terms. His grandfather was the the Rajah of Chettinad. In 2012, Forbes listed him as the 88th richest person in India with a net worth of $650 million.

The Chettinad Group has over 15 companies, including listed Chettinad Cement, and others are engaged in manufacturing (granites, silica and quartz), services (coal handling and engineering), trading, IT, wind farm and plantations.

Ramaswamy, the horse-racer who entered the Guinness Book by winning more than 300 Classic Races, today owns approximately 1,000 horses. The Chettinad Palace in the city, in which MAM lives, is located on a 70 acre area.

CBI court rejects bail plea of Registrar of Companies, Chennai




BS Reporter  |  Chennai  
 Last Updated at 16:13 IST

The RoC who is an accused in a bribery case will be sent to CBI custody for three days

CBI Court here dismissed the bail plea of the Registrar of Companies, Chennai, who was arrested for taking bribe of Rs 10 lakh from the industrialist M A M Ramasamy of Chettinad Group. The Court also allowed the CBI to take the Registrar M Manu Neethi Cholan, in its custody from September 3rd afternoon, for three days.

It may be noted that on August 28 when the bail plea came up for hearing the CBI  requested the Court that the agency needs Cholan in custody for further investigation. It also said that the CBI officials arrested Cholan along with Rs 10 lakh and another Rs 40,000 was recovered from the car he was traveling. Further, on search conducted in his office and residence, the agency recovered Rs 24.81 lakh along with several title deeds and immovable assets in his name and his relatives' names.

In a statement on Tuesday, the CBI said that reliable information was received that Cholan had demanded Rs 10 lakh as illegal gratification from Ramaswamy, the chairman of the Chettinad Group of Companies. The statement also revealed that there was an attempt by a rival group within the management to take control over the Chettinad Group during the AGM.

Cholan, according to CBI, demanded the illegal gratification for not approving the decision that was going to be taken at the AGM.

Ramaswamy is known to be the richest Chettiar, one of the richest trading communities in the country, on an individual basis and he has also been the Sheriff of Chennai for two terms. His grandfather was the the Rajah of Chettinad. In 2012, Forbes listed him as the 88th richest person in India with a net worth of $650 million.

The Chettinad Group has over 15 companies, including the listed Chettinad Cement. The group’s other interests include cement, power, textile, health care, education, logistics, coal terminals, construction, plantations, and others.

United Bank of India declares Kingfisher Airlines wilful defaulter


B S Somasroy Chakraborty  |  Mumbai  
 Last Updated at 12:09 IS
T

The classification indicates the besieged airline has defaulted on repayments despite having the funds to do so
 The United Bank of India on Monday declared the groundedKingfisher Airlines and chairman Vijay Mallya a so-called 'wilful defaulter', making it the first bak to do so.
"We have declared Kingfisher Airlines, Vijay Mallya and a few other directors of the airline company as wilful defaulters," Deepak Narang, executive director of UBI, toldBusiness Standard.
The move comes after the Calcutta High Court last week dismissed the grounded airline company's plea against the bank. Kingfisher Airlines had moved the court after the bank identified it as a wilful defaulter and asked Mallya to appear before its grievance redressal panel.
 
UBI is one of the many lenders to Kingfisher Airlines and has an exposure of about Rs 400 crore to the embattled airline.

According to Reserve Bank of India (RBI) norms, a 'wilful default' is said to have occurred when an entity defaults in its payment obligations to lenders even if it has the capacity to pay and doesn’t use the funds for which the loan was availed, or diverts such funds. If the borrower uses short-term working capital funds for long-term purposes not in conformity with the terms of the sanction or deploys the borrowed funds for creation of assets other than those for which the loan was sanctioned, it is construed as diversion or siphoning of funds.
List of company Vijay Mallya is on board as chairman/director
Company NameDesignationYear Ended
Bayer Crop Sci.Chairman201403
Sanofi IndiaChairman201312
Mangalore Chem.Chairman201403
U B HoldingsChairman201303
United BreweriesChairman201303
KF AirlinesChairman & Managing Director201303
Shaw WallaceChairman200803
HerbertsonsChairman200503
Shaw Wallace DisChairman200503
Shaw Wallace FinChairman200503
McDowell & CoChairman200003
Asian Age(South)Chairman200003
   
Source: Capitaline

Kingfisher Airlines is the leading company in a list of defaulters compiled by the finance ministry. The list also has Winsome Diamond (Rs 3,243 crore), Electrotherm India (Rs 2,653 crore), Corporate Power (Rs 2,487 crore) and Sterling Biotech (Rs 2,031 crore).

Separately, government-owned banks have been told to crack the whip on defaulters, and to recover dues from the top 50 as a first step. The ministry plans to make the rules regarding wilful defaulters more stringent, so that criminal charges can be pressed against such entities.

The ministry has proposed that a promoter or a board member of an entity classified as a wilful defaulter be barred from becoming a director in any other company. It had also been proposed that passports of such people be impounded, bankers said.

Timeline
  • May, 2014: United Bank of India slaps wilful defaulter notice on Kingfisher Airlines, Vijay Mallya
  • July, 2014: Kingfisher Airlines moves Calcutta High Court challenging United Bank of India's notice
  • August, 2014: Calcutta High Court dismisses Kingfisher Airlines' appeal against United Bank of India
  • September, 2014: United Bank of India declares Kingfisher Airlines, its chairman Vijay Mallya and other directors as wilful defaulters for non-payment of dues estimated at around Rs 400 crore

Thursday, August 28, 2014

Banks seek stricter norms for reporting on wilful defaulters

Happy Vinayagar Chathurthi !

Wednesday, August 27, 2014

Recovering cheque-bounce money to get more tedious



Dhananjay Mahapatra, TNN | Aug 9, 2014, 02.30AM IST

NEW DELHI: Recovering money if a cheque bounces will now be a lot more tedious and costly. 

In a landmark judgment, the Supreme Court has changed the ground rule under Section 138 of Negotiable Instruments Act to prosecute a person who had presented the cheque which bounced for insufficiency of funds. 

Earlier, a case under Section 138 could be initiated by the holder of the cheque at his place of business or residence. But, a bench of justices TS Thakur, Vikramjit Sen and C Nagappan ruled that the case has to be initiated at the place where the branch of the bank on which the cheque was drawn is located. 

This means, if a man from Delhi gave a cheque drawn on a Delhi bank for buying something in Chennai and it bounced for insufficiency of funds, then the aggrieved person will have to travel all the way from Chennai to Delhi to initiate prosecution under Section 138.
And the judgment would apply retrospectively. This means, lakhs of cases pending in various courts across the country would witness a interstate transfer of cheque bouncing cases. 

Writing the judgment for the 3-judge bench, Justice Sen said: "We are quite alive to the magnitude of the impact that the present decision shall have to possibly lakhs of cases pending in various courts spanning across the country." However, the court said that in those cases where recording of evidence has started after issuance of summons to the accused, would continue to be tried at the place they were instituted. 

"To clarify, regardless of whether evidence has been led before the Magistrate at the pre-summoning stage, either by affidavit or by oral statement, the complaint will be maintainable only at the place where the cheque stands dishonoured," the bench said. 

The bench said: "In this analysis, we hold that the place, situs or venue of judicial inquiry and trial of the offence must logically be restricted to where the drawee bank is located." 

"An interpretation should not be imparted to Section 138 which will render it as a device of harassment, that is, by sending notices (about the bouncing of cheque under Section 138) from a place which has no casual connection with the transaction itself, and/or by presenting cheques at any of the banks where the payee may have an account," the bench said. 

"It is also now manifest that traders and businessmen have become reckless and incautious in extending credit where they would heretofore have been extremely hesitant, solely because of the availability of redress by criminal proceedings," the bench said referring to the rapid increase in institution of cases under Section 138 of NI Act after it was made a criminal offence. 

"Today's reality is that every magistracy is inundated with prosecutions under Section 138 of the NI Act, so much so that the burden is becoming unbearable and detrimental to the disposal of other equally pressing litigation," the court said. 

The court said for filing a criminal case under Section 138 NI Act, the holder of the cheque must have to travel to the place where the branch of the bank on which the cheque was drawn is located. In the alternative, he could institute a case under Section 420 (cheating) at the place of his residence or where he ordinarily carries out business. 

"If the payee succeeds in establishing that the inducement for accepting a cheque which subsequently bounced had occurred where he resides or ordinarily transacts business, he will not have to suffer the travails of journeying to the place where the cheque has been dishonoured," it said. 

"All remedies under the IPC and Crpc are available to such a payee if he chooses to pursue this course of action, rather than a complaint under Section 138 of NI Act. And of course, he can file a suit for recovery wherever the cause of action arises dependent on his choosing," the court said.

Tuesday, August 26, 2014

Under greater scrutiny, banks’ stressed asset sales to ARCs rise sharply

 George Mathew | Mumbai | August 25, 2014 8:53 am
With the CDR (corporate debt restructuring) route now coming under tighter regulatory monitoring, banks seemed to have found a new window to evergreen their stressed assets — asset reconstruction sector.
The Reserve Bank of India (RBI) has said that banks sold stressed assets worth Rs 16,960 crore in 2013-14 as against just Rs 1,320 crore in the previous year.
In the first quarter of 2014-15, banks have sold over Rs 15,000 crore to ARCs, almost equivalent to the full year’s figure last year. The full year of 2014-15 may witness asset sales of Rs 50,000 crore, say investment banks like Credit Suisse.
The RBI is not happy with the new trend. “The improvement in NPAs during Q4 of 2013-14 needs to be cautiously examined in the face of the increased offload of loans to asset restructuring companies (ARCs) by banks,” the RBI said in its Annual Report.
Out of Rs 16,960 crore asset sales in  2013-14, Rs 15,470 crore was accounted by public sector banks. Mega asset sales involving Bharati Shipyard (Rs 8,000 crore) and Hotel Leela (Rs 4,000 crore) were reported in the first quarter of this year.
Why are banks suddenly attracted to offloading of loans to ARCs? According to the RBI’s Financial Stability Report, as most of the securitisation activity is taking place predominantly with the issuance of securities receipts (SRs) rather than cash, there is concern that banks may tend to use this option to evergreen their balance sheets. SRs may not carry the stigma of non-performing assets (their value mainly being derived from the collateral and not based on the record of recovery), although the risk of loss of income on the asset still remains, in effect, with the originator, i.e., the bank.
Earlier this month, tightening the norms, the Reserve Bank increased the mandatory minimum holding in securities receipts from 5 per cent of the securities receipts issued by them to 15 per cent of the securities receipts of each class in each scheme, while granting them more time for due diligence.
This means banks will get 15 per cent as cash which can be added to the P&L account and the balance will be given by the ARC over a period of eight years depending on the recovery.
Massive corporate debt restructuring and asset sales to ARCs have aided banks to reduce the NPA level marginally. Gross NPAs increased from 2.4 per cent of gross advances in March 2011 to 4.4 per cent in December 2013, before declining somewhat to 4.1 per cent in March 2014.
The RBI said the ‘real’ incremental value addition of ARCs in the process of ‘reconstruction’ of assets, over banks’ traditional skills and informational advantage (stemming from their credit appraisal, monitoring and recovery processes) needs to be assessed. Further, as the banking industry has a significant stake in the ownership of most of the ARCs presently functioning in India, the spread of risks may not be taking place effectively, it said.