The Allahabad High Court has ordered the Central Bureau of Investigation (CBI) to investigate the sanctioning of multiple loans to Simbhaoli Sugars, a company based in Uttar Pradesh, India, by seven banks, despite knowing that it had defaulted on loans in the past.
The Court called it a “shocking case of clear connivance of unscrupulous businessmen and banks”. The Court observed that the banks extended the loan facilities to the company without following the Reserve Bank of India (RBI) guidelines and without adequate security.
The banks even approved loans running into several hundred crores and disbursed the entire loan without following the mandatory steps or procedures, which banks are supposed to take before disbursing the loan. The Court added that the company had “adopted the same modus operandi” again and again with seven banks.
The seven banks that extended the loans to Simbhaoli Sugars are State Bank of India (SBI), UCO Bank, ICICI Bank, Oriental Bank of Commerce, Punjab National Bank, Bank of India, and Bank of Baroda. The Court noted that these banks had not taken any effective steps to recover the amount, even after declaring the company’s account NPA or Non-Performing Asset.
The Court also found that the company had not paid sugarcane dues to the farmers, and even today, ₹279 crores remained outstanding for the last crushing season.
The Court directed the CBI to investigate each and every bank as to how the loans were sanctioned in contravention of the RBI guidelines and circulars. The Court particularly said the officers of the banks who accorded the approval and those who did not take effective steps to recover the amount be probed.
In case, the CBI finds that there is a case of money laundering as per the provisions of Prevention of Money Laundering Act, 2002, they may also refer the matter to the Enforcement Directorate and take help to recover the said amount, the Court ordered. The Court also directed the Simbhaoli Sugars to join the investigation and cooperate with the probe.
The Simbhaoli Sugars company has been accused of "knowingly allowing" siphoning of almost ₹1,300 crores of public money. The Court censured the banks, saying that some of them had not even sought personal guarantees of the promoters.
There was no post-disbursement supervision by the banks, it added. The Court also questioned the documents supplied by the company to show its capacity to pay back and suspected that they were either fabricated or forged.
In conclusion, the Allahabad High Court’s order to investigate the sanctioning of multiple loans to Simbhaoli Sugars, despite knowing that it had defaulted on loans in the past, highlights the need for the banks to follow the RBI guidelines and circulars. It also emphasizes the importance of effective steps to recover the amount and post-disbursement supervision by the banks. The investigation by the CBI will help in finding out the money trail and help recover the said amount.
