Live Law DRT: 2018

Tuesday, November 6, 2018

Credit card , Dubai case Malayala manorama

മലയാളിക്ക് 10 ലക്ഷം നഷ്ടപരിഹാരം, വിധി ശരിവച്ച് അപ്പീൽകോടതി Tuesday 06 November 2018 10:33 AM IST by സ്വന്തം ലേഖകൻ representative image Text Size ദുബായ്∙ ഗ്യാരന്റി ചെക്ക് ഉപയോഗിച്ചു മലയാളി യുവാവിനെതിരെ കേസ് ഫയൽ ചെയ്ത ബാങ്കിങ് സ്ഥാപനം 50,000 ദിർഹം (10 ലക്ഷത്തോളം രൂപ) നഷ്ടപരിഹാരം നൽകാനുള്ള പ്രാഥമിക കോടതി വിധി അപ്പീൽകോടതി ശരിവച്ചു. കോഴിക്കോട് സ്വദേശി അജിത്തിനാണ് അനുകൂല വിധി

Thursday, November 1, 2018

SARFAESI: Borrower/Debtor Can File Securitisation Application At The Stage Of The Possession Notice, Holds SC

Read more at: http://www.livelaw.in/sarfaesi-borrower-debtor-can-file-securitisation-application-at-the-stage-of-the-possession-notice-holds-sc/

Tuesday, October 2, 2018

കേരളത്തിലേതടക്കം 4230 ബാങ്കിങ് ഇതര ധനകാര്യ സ്ഥാപനങ്ങളുടെ ലൈസന്‍സ് റദ്ദാക്കി ആര്‍ബിഐ; കച്ചവടം പൂട്ടുന്നവരില്‍ കൊശമറ്റവും കുറ്റൂക്കാരനും പോപ്പുലറും അടക്കം 58 കേരള സ്ഥാപനങ്ങളും

കേരളത്തിലേതടക്കം 4230 ബാങ്കിങ് ഇതര ധനകാര്യ സ്ഥാപനങ്ങളുടെ ലൈസന്‍സ് റദ്ദാക്കി ആര്‍ബിഐ; കച്ചവടം പൂട്ടുന്നവരില്‍ കൊശമറ്റവും കുറ്റൂക്കാരനും പോപ്പുലറും അടക്കം 58 കേരള സ്ഥാപനങ്ങളും; പാവപ്പെട്ടവന്റെ പിച്ചച്ചട്ടിയില്‍ കൈയിട്ടുവാരിയ കോടീശ്വരന്മാരായ വെള്ളക്കോളര്‍ ബ്ലേഡ് കമ്ബനി മുതലാളിമാര്‍ക്ക് നിനച്ചിരിക്കാതെ പണി കിട്ടിയതിങ്ങനെ; പ്രതിസന്ധിയിലാകുന്നത് മുണ്ടുമുറുക്കിയുടുത്ത് പണം നിക്ഷേപിച്ച അരപ്പട്ടിണിക്കാര്‍
http://dhunt.in/4LUWd?s=a&ss=wsp
via Dailyhunt

ആപ്പ് ഡൗൺലോഡ് ചെയ്യുക
http://dhunt.in/DWND

Saturday, September 15, 2018

Demonstration By Bank Officials In Front Of Defaulter’s House Violates His Right To Privacy: Kerala HC

Read more at: http://www.livelaw.in/demonstration-by-bank-officials-in-front-of-defaulters-house-violates-his-right-to-privacy-kerala-hc/p

Consumer Protection Act Not A Tool To Create ’Nuisance Value’ In Govt Offices: NCDRC Asks Unemployed Youth To Give Rs 100 In Charity For Seeking Rs 87cr In Damages From Employment Exchange

Consumer Protection Act Not A Tool To Create ’Nuisance Value’ In Govt Offices: NCDRC Asks Unemployed Youth To Give Rs 100 In Charity For Seeking Rs 87cr In Damages From Employment Exchange [Read Order]

Read more at: https://www.livelaw.in/consumer-protection-act-not-a-tool-to-create-nuisance-value-in-govt-offices-ncdrc-asks-unemployed-youth-to-give-rs-100-in-charity-for-seeking-rs-87cr-in-damages-from-employment-exch/

Sunday, August 5, 2018

under OLD rules, banks used to make Customer liable for all the transaction carried out (Genuine or fraudulent) until the time of reporting of loss of card / fraudulent transaction.

Hi,

Wanted to update you about something good and important.

So far, under OLD rules, banks used to make Customer liable for all the transaction carried out (Genuine or fraudulent) until the time of reporting of loss of card / fraudulent transaction.

Now (in fact, from 6-July-2017), RBI has circulated NEW RULES. These apply for all card (Debit/ Credit / prepaid), Netbanking, e-Wallets / Payment Bank Account, fund transfer Transactions. Here is the quick summary:

1. Customer MUST be notified of every Transaction via SMS AND ALSO email.

2. Customer liability is ZERO, If there is a security lapse / shortfall or negelgence of the bank system / process, IRRESPECTIVE , whether customer has reported the loss or not.

3. Customer liability is ZERO, if the loss / fraudulent transaction is reported in 3 WORKING days, EXCLUDING the day of receiving Transaction notification / intimation / communication by the bank.

4. If the loss / fraudulent transaction is reported in 4 to 7 working days, MAXIMUM liability of the customer is 10,000 (TEN Thousand only) for most of the cases / Account / card holders (i.e. up to 5 lakhs) and max 25,000 for all other.

Full circular is here:
https://m.rbi.org.in//scripts/notificationuser.aspx?Id=11040&mode=0

That's really a very big relief.

PS : please share with your friends and spread the awareness.

Sunday, July 8, 2018

MSME unit it is a priority lending sector by a Government Policy to bring about Economic Development of The Country.

How Stupid our Judiciary can become, I will prove to you.
For a MSME unit it is a priority lending sector by a Government Policy to bring about Economic Development of The Country.
1. Banks are give Projections if a Business
2. Banks on being convinced fund upto 75% of the Business
3. So Banks are a major partner in the Business gor the welfare of the Country
4. Business is like a ship. If holes develop it does not sink overnight unless there is a hurricane like Lehman Brothers.
5. Banks are aware of the holes because the Account of the Business is with them.
6. A major shareholder keeps his head in the hole ignoring all symptoms of a likely default and takes no corrective action. Why ? The Stakes are Higher for him?
7) He purposely waits till the Business collapses.
8) Then Comes the Dissection. The Butchers Kinfes are Out sharpened at the Altar of Drts. Debt is recalled. But Debt went to create Asset for the Country. So what? Banks want their Money. They killed the MSME in the first instance and now they want their Money with interest. The very ethos of the Prime Objective of the Country is forgotten.
9) The Judges are not even a semblance of King Solomon. They without Batting a Single Eyelid, Pass Orders for the poor MSME promoter to deposit 50% of the Debt and Interest demanded by Bank, who had created that situation in the first place.
10) How can a minority 25% share holder in the Business , whose 25% has already eroded, bring in 50 %? An impossible task.
11) The final noose is tightened around the neck of the MSME entrepreneur .
12) Who looses? The Entrepreneur and the Labour and the Country.
13) The Judges who handle the mantle of the Sword , a their unimaginable and ignorance of the MSMED Act with one Strike of 50% bring about the complete death of the MSME. Their Order “ Pay 50% and then We The Gods” will hear You” Do they realise that Dead Bodies do not Speak. Can They?
14) Are the Judges the Upholders of the Law or Complicit Humans of an illegal action of the Bank who by their reckless actions and purposeful ignorance of the MSMED Act and the Mandatory Guidelines of The RBI go Scot free to squander Public Funds on Mallaya and Modis, making the Poor MSMEs a sacrificial Goat ?
15) The Goat goes to the Temple of Justice clutching the finger of the Advocate, hoping to survive a death, little knowing that to save that death he has to kill himself because the Keeper of Justice demands 50% of his Bones and Blood. Without dying can this Order be Executed?
15) Is this Justice?
16) Misery they name is Poverty. Why put up a facade of MSMEs when your real motive is Mallaya and Modi? Right from Every Big Industrialist past or present they have looted the system and all persons in the system have made personal fortunes. The MSME Goat was fed by the System to be Sacrificied on Eid.
Believe me after the Goat is Sacrificied the Flesh and Bones are exchanged as blessings of God for the penance of the Fasting that the Bank did. During the day the Bank ate no interest but at night are a compounded interest. Sarfaesi and Justice are the Knives of their Armour, the Goat is not aware of. They give the Goat Green Grass, knowing very we’ll that the future holds a fat prize for them. Money begets More Money. The Goat Dies. Who Cares?

Saturday, June 9, 2018

casual act of letting your spouse or a close relative/friend withdraw money from an ATM using your debit card could prove costly. This is what a Benglauru woman on maternity leave recently learnt.

Banking rules categorically state that an ATM card is non-transferable and no other person apart from the account holder should use it.

On November 14, 2013, Marathahalli resident Vandana gave her debit card with PIN to her husband, Rajesh Kumar, to withdraw Rs 25,000 from a local SBI ATM. Rajesh went to the ATM and swiped the card; the machine delivered a slip showing the money was debited, but the amount was never released. SBI cited the ‘non-transferable’ rule and said the account holder was not the ATM user and turned down the money claims.

Vandana approached the Bangalore IVth Additional District Consumer Disputes Redressal Forum on October 21, 2014, alleging that SBI had failed to refund the Rs 25,000 she’d lost in the ATM transaction. She said she had just given birth and could not move out of home, hence had to ask her husband to draw the money on her behalf.

Before approaching the consumer forum, the couple made a final plea to the bank ombudsman who simply ruled, ‘PIN shared, case closed.’

The case went on for over three-and-a-half years. Vandana said SBI should refund her money which was lost due to an ATM flaw, but the bank stood its ground, citing the rule that sharing ATM PIN with someone else was a violation. Further, the bank produced documents, including log records, showing the stated ATM transaction was successful and technically correct.

In its verdict on May 29, 2018, the court ruled that Vandana should have given a self-cheque or an authorisation letter to her husband for withdrawal of Rs 25,000, instead sharing the PIN and making him withdraw the money. The court dismissed the case.

https://timesofindia.indiatimes.com/city/bengaluru/woman-at-fault-for-sharing-debit-card-with-spouse-court/articleshow/64485320.cms

Tuesday, May 8, 2018

Civil Suit Not Maintainable After SARFAESI Proceedings Are Initiated: SC

Civil Suit Not Maintainable After SARFAESI Proceedings Are Initiated: SC [Read Order]

Read more at: http://www.livelaw.in/civil-suit-not-maintainable-after-sarfaesi-proceedings-are-initiated-sc-read-order/

Difference if MPs in UK and INDIA

Wednesday, April 4, 2018

Difference if MPs in UK and INDIA

ILR 2018(1)kerala 479 article 226 High court should not entertain WPs arising from proceedings under SARFAESI Act and grant interim orders when efficacious alternative remedy is available under the said Act

Article 226 High court should not entertain WPs arising from proceedings under SARFAESI Act and grant interim orders when efficacious alternative remedy is available under the said Act

Thursday, March 8, 2018

Total Non-performing asset (NPA) of indian banks as of December 2017 was* *₹ 7,63,000 Crores from 500 Default companies

Today whole of India is worried about a Fraud of ₹11,345 Crore fraud by Nirav Modi.
All Political Parties are blaming the opposition for the Fraud.

Now if you read the message below you will find Frauds of Vijay Mallaya and Nirav Modi as Babies.
*Total Non-performing asset (NPA) of indian banks as of December 2017 was*
*₹ 7,63,000 Crores from 500 Default companies.*
Now read the figures of Debts of top 12 Companies which will never be paid to Banks and we never heard of this defaults anywhere....
-Bhusan Steel ₹44,478 Crore.
-Lanco Infratech ₹44,364 Crore.
-Essar Steels ₹37,284 Crore.
-Bhusan Power ₹32,248 Crore.
-Alok Industry ₹22,075 Crore.
-Amtech Auto ₹14,084 Crore.
-Monet Ispat ₹12,115 Crore.
-Electro Steels ₹10,273 Crore.
-Era Infra Eng ₹10,065 Crore.
- J.P Infratech ₹9,635 Crore.
-ABG Ship Yard ₹6973 Crore.
-Jyoti Structured ₹5,165 Crore.

*Where did this Money Go .....????*
*Why everyone is quiet about it...??*

All Figures verified by The Wire Channel and you can read stories of each Company’s Default on Google.

BIG PUBLIC SECTOR BANKS ARE GOING TO COLLAPSE IN JULY

[25/02 2:29 am] ‪+91 98465 94136‬: We were preveleged! We had servings of acidophilus bacteria parlour in every village to curb fungus growth.. cancer. Toddy parlour
[25/02 12:11 pm] ‪+91 94471 69591‬: *WARNING: BIG PUBLIC SECTOR BANKS ARE GOING TO COLLAPSE IN JULY*

The Media will never tell you this story. Read on.

Two years ago, RBI Governor Raghuram Rajan ordered all banks to declare bad loans. Till then, all banks were hiding the loans taken by big corporates which they hadn't given back.

Vijay Mallya is in the news for not paying back Rs 7000 crore. But the paid media will never tell you the other BIGGER names. Here are the top three:

👉🏻GMR group: Rs 36000 crore
👉🏻Gautam Adani Group: Rs 42000 crore
👉🏻Jindal Group: Rs 39000 crore

These are ONLY three names. There are 10 BIG companies who have defaulted on Rs 40000 crore on an average EACH.

ONE loan default, if recovered can pay for:
👉🏻 Complete employment guarantee for the whole country for one year.
👉🏻 Primary Healthcare for 80 crore people
👉🏻 Poverty will go down by 2% for EVERY loan recovered.

The total amount of money that these big corporates owe to OUR Banks is Rs 7.7 LAKH CRORE.

This is the BIGGEST SCAM that India has EVER seen!
👉🏻 2G scam was Rs 1.7 lakh crore
👉🏻 Coal scam was Rs 80, 000 crore
👉🏻 Lalus चारा घोटाला was 8000 crore
👉🏻 Maharashtra Govt's irrigation scam was Rs 40,000 crore

THIS SCAM IS 10 TIMES BIGGER AT *Rs 7.7 LAKH CRORE*

The BJP Government is HIDING this from all of us and paid the media to ONLY do stories on GAU Raksha, Vijay Mallya, Modi speeches, Kejriwal's failures, P Chidambaram's raids so that WE NEVER FIND OUT.

This month, BJP passed a law which allows the Modi Government to completely control RBI so that it does whatever they tell them. RBI has been directed to let these big corporates off the hook and the Government will give TAXPAYER MONEY (Your money) to these Bad Banks.

THERE WILL BE A CORPORATE LOAN BAILOUT and these CROOKS WILL GET AWAY.

To collect MORE money from us, they are bringing in GST, they are attaching Aadhaar with IT returns to TRACK and EXTORT taxes from middle class hardworking people.

*Some of these loans are going to DEFAULT in a month. After that, our BANKS ARE GOING TO COLLAPSE one after another.*

After they collapse, the Government will GIVE taxpayer money to save them from crisis. The Government is giving out ALL fake figures to show that everything is fine.

*NOTHING IS FINE. IT'S GOING TO GET WORSE.*

THIS IS A WARNING TO ALL INDIANS. BEWARE. DONT TRUST THE PAID MEDIA AND KEEP A WATCH ON THE BANKS.

*FORWARD THIS TO ALL INDIANS AND TELL THEM ABOUT THIS SCAM. THIS ONE IS GOING TO TAKE INDIA DOWN WITH IT.*
🇮🇳🇮🇳🇮🇳 SAVE INDIA 🇮🇳🇮🇳🇮🇳. forwarded as received on whatsapp.

Monday, March 5, 2018

Banks to secure the forcible dispossession of the very residential homes of borrowers covered under the Small and Medium Enterprises Act.*

*Press Release*

*The Hon'ble the CJI has been gracious enough to grant the plea of Sri Nedumpara for the emergent hearing of a WP by one Sri Santhosh Nayak challenging the validity of the SARFAESI Act in so far as it empowers the Banks to secure the forcible dispossession of the very residential homes of borrowers covered under the Small and Medium Enterprises Act.*

*Sri Nedumpara had to seek the leave of Hon'ble CJI which His Lordship was pleased to graciously grant to mention the WP of Sri. Nayak which had to be instituted in view of the dispossession of Shri Nayaks home tomorrow at 11 am.*

*The plea of Sri. Nedumpara is that the SARFAESI Act is no draconian enactment in so far as the big borrowers who defraud the Bank by availing of thousands of Crores of rupes like Mallays, Nirav Modis without offering any collateral security are concerned, in stark contrast to its effect against the small time entrepreneurs who offer securities far in excess of the loan availed of, namely, even their only residential homes, which are forcibly dispossessed of, without affording them the care and nursing which they are entitled in terms of the MSME Act.*

*The MSMEs are the real backbone of our economy in the sense that, without them the big industries cannot exist. The MSMEs provide for more than 60% of the total employment. The merciless action of the Banks under the SARFAESI Act has led almost 40% of all MSME units die out of sickness without being extended the care and nursing the MSME Act provides for.*

*The above case is listed for hearing before the CJI in the supplementary Board.*

*New Delhi*
*5 March 2018*

A C Philip, Advocate

Friday, February 23, 2018

When PM Shastri took a car loan from PNB and his widow repaid it

When PM Shastri took a car loan from PNB and his widow repaid it - https://timesofindia.indiatimes.com/india/when-pm-shastri-took-a-car-loan-from-pnb-and-his-widow-repaid-it/articleshow/63002151.cms

Wednesday, February 21, 2018

W P in SC. The reason for sickness of the Banking industry was nothing but the sickness of the economy. If the economy is on the right path, namely, the manufacturing, service, trade and commerce Industries, the Banks will face no difficulty in recovering the amount lent.

SECTION-…X………
IN THE SUPREME COURT OF INDIA
CIVIL/CRIMINAL/ORIGINAL/ APPELLATE JURISDICTION
SPECIAL LEAVE PETITION (CIV/CRL.) NO.              OF 2018
WRIT/TRANSFER PETITION (CIV/CRL.) NO.              OF 2018
APPEAL (CIV/CRL.) NO.              OF 2018
IN THE MATTER OF:
MATHEWS J.NEDUMPARA
And Ors____...... Petitioner(s)/Appellant(s)
AND
The Union of India &Ors...... Respondent(s)
INDEX
SL.NOPARTICULARSCOPIESCOUER FEES
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
TOTALRs.
DRAWNBY:: FILED BY::

MATHEWS J.NEDUMPARA RABIN MAJUMDER
Advocate Code No.1825
New Delhi.
Drawn on:18.02.2018
Filed on: 21.02.2018

IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CRL.) NO.________OF 2018

BETWEEN
MATHEWS J.NEDUMPARA AND ORS. …..Petitioners
VERSUS
THE UNION OF INDIA & ORS. ...Respondents

P A P E R – B O O K
[FOR INDEX KINDLY SEE INSIDE]

ADVOCATES FOR THE PETITIONERS:RABIN MAJUMDER

RECORD OF PROCEEDINGS

SL.NO. DATE OF RECORD OF PROCEEDINGS PAGE(S)

1.ORDER DATED
2.ORDER DATED
3.ORDER DATED
4.ORDER DATED
5.ORDER DATED
6.ORDER DATED
7.ORDER DATED
8.ORDER DATED
9.ORDER DATED
10.ORDER DATED
11.ORDER DATED
12.ORDER DATED
13.ORDER DATED
14.ORDER DATED
15.ORDER DATED
16.ORDER DATED
17.ORDER DATED
18.ORDER DATED
19.ORDER DATED
20.ORDER DATED

INDEX

Sl. No.Particulars of documentsPage No. of part to which it belongsRemarks
Part I
(Contents of paper book)Part II
(Contents of file alone)
(i)(ii)(iii)(iv)(v)
Index of Records of Proceedings
Cover Page of Paper Book
IndexA2
Listing ProformaA3-A4
Defects list
Note Sheet
Synopsis with datesB-E
Writ Petition along with affidavit1-22
F/M
V/A
Authority Letter
Letter of urgency

PROFORMA FOR FIRST LISTING
SECTION –X
The case pertains to (Please tick/check the correct box):

Central Act :
oConstitution of India
oThe State Bank of India Act, 1955
oReserve Bank Of India Act, 1934
oThe Banking Regulation Act, 1949;
oThe Bank Nationalization Act, 1971.
oRecovery of Debts and Bankruptcy Act, 1993
oSARFAESI Act,2002
oThe Insolvency and Bankruptcy Code,2016
Section: Art. 32,145 of Constitution of India
Central Rule : NA
Rule No(s): NA
State Act : (Title)NA
Section: NA
State Rule : (Title)NA
Rule No(s):NA
Impugned Interim Order: NA
Impugned Final Order/Decree : NA
High Court: (Name): Na
Names of Judges:NA

Tribunal/Authority: Nil
Nature of matter:
□Civil □Criminal

2. (a) Petitioner/appellant No.1 : MATHEWS J.NEDUMPARA
b) e-mail ID: mathewsjnedumpara@gmail.com
pradeeparingada@gmail.com
(c) Mobile phone number: 9820535428,9769110823
3, (a)Respondent No.1: The Union of India
(b) e-mail ID: NIL
(c) Mobile phone number: NA
4. (a) Main category classification: 14(Matters relating to Criminal Matters)
(b) Sub classification: 1406(Matters Relating to Bank Scams, Cheating, Forgery Etc.)
5. Not to be listed before: NA
6. Similar/Pending matter: N/A
7. Criminal Matters: NA
(a) Whether accused/convict has surrendered: Yes No
(b) FIR No.NA Date: NA
(c) Police Station: NA
(d) Sentence Awarded: NIL
(e) Sentence Undergone: nil
8. Land Acquisition Matters: Na
(a) Date of Section 4notification: Na

(b) Date of Section 6 notification: NA
(c) Date of Section 17 notification: NA
9. Tax Matters: State the tax effect: NA
10. Special Category (first petitioner/appellant only): NA
Senior citizen 65 years SC/ST Woman/child Disabled Legal Aid case/In custody
11. Vehicle Number (in case of Motor Accident Claim matters): NA
12. Decided cases with citation:

Date: ____thFebruary,2018Rabin Majumder,
Advocate on Record for the petitioner(s)/appellant(s)
Code:1825
E mail: nudelhilawfora@gmail.com
Mob:9899259811

SYNOPSIS AND LIST OF DATES
The reason for sickness of the Banking industry was nothing but the sickness of the economy. If the economy is on the right path, namely, the manufacturing, service, trade and commerce Industries, the Banks will face no difficulty in recovering the amount lent.
The Banking industry in this country is in dire straits. No amount of window dressing can conceal it for long. The pertinent question is, how could have the Banks invested thousands of crores in ventures, owned by the Anil Ambanis, Mallyas, Gulshans and the like without there in existence adequate securities to cover the credit facilities so extended? It is not too difficult to find the answer to the question. The corruption and malpractices which plague the Indian Banking system is the reason. There is no real accountability. At the end of the day, when the Bank is badly bleeding, nobody is made responsible. There are many reasons why the system of checks and balances have failed miserably. And it will continue to fail, even worse, in the not so far future.
And it is done with the knowledge of everyone in the system which ensures the checks and balances. The fraud as above is no matter in isolation. It is almost the rule. And it is really horrifying. The only way the rampant corruption could be dealt with is to bring about greater transparency and reforms. The Banking industry cannot be a cloistered virtue. What is therefore imperative is to put into existence a mechanism which could diversely investigate banking frauds. Such a body shall consist experts of banking, auditing and investigations so too of the small entrepreneurs, traders and farmers.
Hence the instant Writ Petition (Criminal) for Writ in the nature of Mandamus and other remedies.

THE LIST OF DATES

January, 2013When banks told the RBI that it was becoming difficult to eliminate or reconcile the burgeoning Nostro accounts, the central bank specifically advised that public sector banks should minimize the number of Nostro accounts to have a better control over reconciliation.A nostro account is an account that a bank holds in a foreign currency in another bank.It appears the banks did have a clear idea of the risk way back in 2013 when they went to RBI with the problem.;
Another compliance failure that facilitated the Rs 11,000 crore scam was the unmonitored usage of the SWIFT financial messaging system. In this too, it is found a cautionary tale from two years ago, when the Union Bank of India was hacked and lost (though later recovered) $171 million. Most importantly, just like the Nirav Modi scandal, fraudulent payment instructions went out over SWIFT, bypassing the core banking system;
September, 2016RBI deputy governor S.S. Mundra gave a speech, in which he addressed this issue, thus: “Recently, in India too, a similar attempt was made on a commercial bank by generating fraudulent payment instructions on the Nostro accounts and transmitting them over SWIFT messaging system. Though monetary loss could be prevented with proactive follow-up with the concerned paying/intermediary banks, the incident has reinforced the fact that the various stakeholders have not learnt the lessons yet”;
29/01/2018A PNB official from Mumbai filed a criminal complaint with Central Bureau of Investigation (CBI) against 3 companies, Solar Exports, Stellar Diamonds and Diamond R US, and four people, including diamantaire Nirav Modi and Mehul Choksi, the managing director of Gitanjali Gems, saying they had defrauded the bank and caused a loss of Rs. 280 crore ($43.8 million). The bank alleged two junior employees at the Mumbai branch had helped the companies and people managing them get "letters of undertaking" (LoUs) from it without having a sanctioned credit limit or maintaining funds "of margin";
14/02/2018 PNB said that it had discovered fraudulent and unauthorised transactions totaling Rs. 11,300 crore at the Mumbai branch. Investigators have said the latest disclosure was related to the earlier case filed;
15/02/2018Axis Bank said that it had dealt in transactions that had been guaranteed with letters of undertaking from Punjab National Bank, but it had since sold those transactions;
16/02/2018 Raids were carried out by the Central Bureau of Investigation (CBI) on the offices of jewellery retailer Gitanjali, whose chief executive has been accused along with Nirav Modi of colluding with PNB employees to fraudulently obtain advances for payments to overseas suppliers;
17/02/2018State-run UCO Bank said it has an outstanding exposure of about $411.82 million in the $1.8 billion fraud detected in public sector Punjab National Bank (PNB) and that it was confident of receiving the payment. The Income Tax department warned in an internal note seen by media that domestic banks could take a hit of more than $3 billion from loans and corporate guarantees provided to Nirav Modi and Mehul Choksi. A tax department spokeswoman told media that officials had seized 29 properties and 105 bank accounts linked to Nirav Modi.
21/02/2018Instant Writ Petition filed.

IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (Crl.) NO. ________OF 2018
BETWEEN
1.Mathews J.Nedumpara,
Villa No11, Tudor Villas,
DD, Padam Road,
Vaduthala,
Cochin, 682 023.…PETITIONER NO.1

2.A.C.Philip,
Residing at:
#89, Ground Floor,
ShresthaVihar,
New Delhi-92.…PETITIONER NO.2

3.Mrs.Rohini M Amin
B/705, Nirman Apts.
R.J Marg, Vikas Nagar,
Pump House,
Andheri (East),
Mumbai- 400 093…. PETITIONER No.3
4.C.J.Joveson,
Advocate,
Cheruvathur House,
Near Block A 335,
Rabindranath Tagore Road,
Kurla Camp,
Ulhasnagar- 421004,
District Thane,
Maharashtra…. PETITIONER No.4
5.AnjanSinha,
L-30-D, Saket,
New Delhi,
Delhi-110 01…. PETITIONER No.5

6.Amrit Pal Singh
Residing at 201/202 Pleasure Park,
Opp. Pinto Park,
O.T Section, Ulhasnagar- 421 003,
District- Thane,
Maharashtra State.…. PETITIONER No.6

Versus

1.The Union of India,
Represented by its Secretary in
the Department of Banking,
Ministry of Finance,
Jeevan Deep Building,
Parliament Street,
New Delhi-110 011.………Respondent No.1

2.The Central Bureau of Investigation,
Represented By it Director,
Plot No-5 B, CGO Complex,
Lodhi Road,
Delhi - 110003,
Opposite Electronics Niketan Office.……RESPONDENT NO.2

3.Enforcement Directorate,
Represented by it's Director,
Office of the Enforcement Directorate,
LokNayakBhavan,
Khan Market,
NEW DELHI-110 003.
Email: edhqrs@finance.nic.in… RESPONDENT No. 3

4.CENTRAL VIGILANCE COMMISSION
Represented by Central Vigilance Commissioner,
Govt.of India,
SatarkataBhavan , A-Block
GPO Complex , INA
New Delhi - 110 023
EPABX :- 011- 24600200 (30 Lines)
FAX : 011- 24651010/24651186
Email : cenvigil@nic.in… RESPONDENT No. 4

5.Reserve Bank of India,
Represented by it's Governor,
Central Office Building,
ShahidBhagat Singh Road,
Mumbai-400 001;… RESPONDENT No. 5

6.Indian Banks' Association
Represented by it's Chairman
World Trade Centre, 6th Floor,
Centre 1 Building,
World Trade Centre Complex,
Cuff Parade,
Mumbai - 400 005.… RESPONDENT No. 6

7.Principal Chief Commissioner Of Income Tax ,
Mumbai region
Aayakar Bhavan,
M.K. Marg,
Mumbai – 400 020………Respondent No.7

8.Institute of Chartered Accountant of India(ICAI),
Represented by it's Chairman,
ICAI Bhawan,
IndraprasthaMarg,
Post Box No. 7100,
NEW DELHI - 110 002… RESPONDENT No. 8

9.Board of Directors of Punjab National Bank,
Represented by its Chairman &
Managing Director.
7, BhikajiCama Place,
New Delhi-110 607.… RESPONDENT No. 9

10.Chairman and Managing Director of
UCO Bank,
UCO Bank Head Office,
10, B T M Sarani, Kolkata - 700 001
West Bengal
India.………Respondent No.10
11.Shri.Nirav Modi,
D-33, VarunMarg,
ShiniwasPuri,
Block D, Defence Colony,
New Delhi-110024… RESPONDENT No. 11

12.Shri.Mehul C. Choksi,
Director of Gitanjali Diamonds,
801-802, Prasad Chambers
Opera House, Mumbai, 400004
India… RESPONDENT No. 12

13.Shri.VijayMallya,
3, VittalMallya Road,
Bangalore,
Karnataka - 560001.… RESPONDENT No. 13

14.Winsome Textile Industries Ltd.,
S.CO 191-192, Sector 34-A
CHANDIGARH 160022. ………Respondent No.14

15.Rotomac Global Pvt. Ltd.,
201,City Centre, 63/2, The Mall,
Kanpur, Uttar Pradesh 208004. ………Respondent No.15

16.Solar Exports,
Plot no 927,Sector 47,
Gurgaon, Sector 47,
Gurgaon – 122001. ………Respondent No.16

17.Stellar Diamonds Plc,
Company number 05424214,
40 Bloomsbury Way,
London, England, WC1A 2SE.
United Kingdom. ………Respondent No.17

18.Fine Diamonds R Us
I C Rawal UK Ltd
Suite 49, New House
67-68 Hatton Garden
London, EC1N8JY
United Kingdom. ………Respondent No.18

19.Gitanjali Gems
801-802, Prasad Chambers
Opera House, Mumbai, 400004
India………Respondent No.19

20.Bhushan Steel Limited,
Bhushan Center
Bhikaji Kama Place
M G Marg, New Delhi - 110066
Ph: 011-71194000………Respondent No.20

PETITION UNDER ARTICLE 32 OF THE CONSTITUTION OF INDIA SEEKING DECLARATION AND OTHER RELIEFS.

TO
THE HON’BLE CHIEF JUSTICE AND
HIS COMPANION JUSTICES OF THE
HON’BLE SUPREME COURT OF INDIA

THE HUMBLE PETITION OF THE PETITIONER ABOVE NAMED

MOST RESPECTFULLY SHEWETH
1.The Petitioners are citizens of India. They institute the instant writ petition for the enforcement of their fundamental rights, nay, to seek remedies in the nature of mandamus as guaranteed under article 32 of the constitution of India. The first petitioner is a lawyer enrolled in the year 1984 and has been in practice since then in different courts and Tribunals in the different parts of the country and primarily in Bombay. He has been mainly practicing in the realm of Banking and therefore has a fair idea of the challenges, nay, the great crisis the Banking industry of the country is facing, so too the constituents, nay, the small time traders and entrepreneurs who seek credit facilities from the Banks and Financial Institutions. The petitioners 2 to 6 too are equally concerned of the crisis the Banking industry is facing today. As tax payers and citizens, the fundamental rights of the petitioners are put to great jeopardy by the rampant corruption and inefficiency and the total breakdown of the regulatory mechanism as evidenced by the ‘Nirav Modi’ and ‘Mallya’ scams to name a few, involving astronomical figures.
2.The legal status and the imperative reason for which the respondents above are arraigned so is manifest from the very cause title itself. The Union of India is a necessary party since the relief sought for cannot be granted in it's absence. The first respondent therefore, is a proper and necessary party to the instant WP. The Respondents 2-8 are necessary parties since the instant WP is all about regulatory mechanisms in the Banking Sector. Respondents 9-20 are proper parties since the just and fair adjudication of the instant WP their presence is imperative. Further it is elaborated infra in the course of the narration of the statement at the appropriate stage.
3.This writ petition certainly involves great amount of public interest. But it is not the so called PIL. PIL, which the great legendary jurist, late Justice V.R.Krishna Iyer, Chief Justices P.N. Bhagavati and Y.V. Chandrachud envisaged, are pro bono litigations to open the doors of this court and HCs to the poor and the illiterate who could not have invoked the jurisdiction of the court under Article 32 and of the High Courts under Article 226, because of their poverty, illiteracy and like reasons. Here, the petitioners are not seeking any relaxation of their locus standi. The remedy of ‘mandamus’ is a public law remedy the chartered High Courts of Bombay, Calcutta and Madras always granted, where sufficient grounds existed; like the writs of Habeas Corpus, Certiorari, Quo Warranto and Prohibition. By Article 226 the power to grant high prerogative writs were extended to all the High Courts and by Article 32 to this court as well. The petitioners therefore cannot be expected to plead that this instant writ petition is a PIL, which it is not.
4.Prior to nationalization of the 14 Major Banks in the year 1969, the Banking industry in this country was entirely in the province of joint stock companies under the management of prominent business families. The only exception was the State Bank of India, nay, the Imperial Bank of India being it's original name. The State Bank of India was distinct from other Banks in the sense that it was a creation of an Act of Parliament.
5.Prior to the independence, there were hardly any legislations to regulate and control the Banking business in the country except the Reserve Bank of India Act. However in the year 1949, the Banking Regulation Act,1949 was enacted, which meant the investiture of certain regulatory powers in the Reserve Bank of India, as also in Government of India. The nationalization of the 14 major Commercial Banks in the year 1969 meant the Banking industry being literally brought under the control of the Government of India. The Banks' nationalisation, though was professed to make the Banks accessible to the common man, particularly to the agriculturists and artisans and to bring them out of the clutches of the money lenders who charge exorbitant interest and to promote the healthy growth of the Banking industry, far from achieving the noble objectives, as above, did not serve any of the said purposes. On the contrary, it reduced commercial Banks into another department of Government. Red tapism, corruption and political influence in the decision making of Banking institutions meant the foundations of the great institutions, which the said 14 commercial Banks once were, eroded.
6.The economic liberalization under the late Shri. P.V.Narasimha Rao and Shri. Manmohan Singh as his finance minister meant a new era of hope. Except that, a few private sector Banks like the ICICI Bank could secure exponential growth, and with the entry of a few Foreign Banks there was not much of a healthy revolutionary change.
7.With the Bank nationalization, the Government of India ,and at it's behest the RBI, interfered in the affairs of the Commercial Banking, particularly in the realm of fixation of interest rates and sanctioning of loans, the Banking institutions were reduced to a Government department.
8.The commercial Banks ceased to function on commercial considerations. The Chief Executive Officers of the Banks were appointed often compromising merits, and on political and other considerations. The economic liberalization had very little real impact. Recovery of Bad Debts became the greatest of concern. The government appointed Chairman and managing directors and other senior functionaries of the state owned Banks which suffered huge losses on account of bad debts which sought to conceal the reality by not providing adequately for bad and doubtful debts. This issue being brought to the public domain, in the nineties, the RBI introduced the concept of compulsory classification of Accounts as NPA. The RBI also introduced various schemes for one time settlement, namely, OTS for resolution of long pending litigations and bad debts.
9.The one single major step which the NDA Govt. led by Shri. Atal Bihari Vajpayee could take credit of is the reduction in the interest rates and flexibility in the fixing of interest rates. The nationalization of the Commercial Banks by the then Prime Minister Indira Gandhi was one single reason which resulted in the crippling of the economic growth of the country. The “license Raj” coupled with bank nationalisation and exorbitant rate of Taxes and in particular income tax, at one point of time, at the rate of 95% crippled the Indian industry and commerce. India’s Contribution in the international trade remained less than 1%. There was great foreign exchange shortage. At the time when late Prime Minister Shri. P.V N Rao embarked upon the path of liberalization of the Indian economy, the Banks were offering 20% interest on Non Resident Accounts. The cost of acquisition funds for our banks was the highest in the world at a ridiculous rate of 20% for NRNR accounts (Non-resident Non-Repatriable Term Deposit Account). The Vajpayee Government by reducing interest rates gave a new life to commerce and industry. However, the fruits of such benevolent measures were largely defeated by the tyrannical and unjust laws which the Vajpayee government enforced to recover the debts, namely the SARFAESI Act,2002. The petitioners beg to dwell into the same at some length infra.
10.The reason for sickness of the Banking industry was nothing but the sickness of the economy. If the economy is on the right path, namely, the manufacturing, service, trade, commerce and industry, the Banks will face no difficulty in recovering the amount lent. On the contrary where when the economy is on the slowdown recovery of monies lent becomes difficult.
11.The Banking industry of this country today is in dire straits. No amount of window dressing can conceal it for long. The total NPA as on date is about 10 Lakh crores. Out of which the contribution of debtors who owe less than 100 crore is just about 17%. The lion share of the NPA constitute to be Iron and Steel, Aluminum, Power, Infrastructure, Real Estate, Construction, Aviation and the like which involve thousands of crores of rupees. The SARFAESI Act is a toothless tiger insofar as recovery of the huge amounts of facilities the Banks had extended to the aforesaid giants, in as much the value of the securities in most cases is just 20 to 30 percent of the credit facilities granted. The pertinent question is: how could have the Banks lent thousands of crores in ventures, owned by the Anil Ambani's, Vijay Mallays, Essar, Ruias, J.P Group, Bhushans, Nirav Modis and the like without there in existence adequate securities to cover the credit facilities so extended? It is not too difficult to find the answer to the question. The corruption and malpractices which plague the Indian Banking system is the reason. Nothing else. The Petitioners beg to dwell in to the same a little further infra.
12.The granting of loans and credit facilities involve multiple levels of decision making and elaborate procedure, nay, all intended to safeguard the interest of the Banks. But that exists only on paper. There is no real accountability. At the end of the day, when the Bank is badly bled nobody is made responsible. There are many reasons why the systems of checks and balances have failed, miserably. And it will continue to fail, even worse, in the not so far future.
13.The funding of profits initiated based on project reports and projections made by the Chartered Accountants and Merchant Bankers. The Petitioners beg to submit, though with a great amount of hesitation, that the failure on the part of the Chartered Accountants and Merchant Bankers to live up to the highest standards of professionalism, competence and ethics is the single most factor for the crisis of such a monumental dimension the banking industry of this country facing today. They charge their clients, namely, the Borrowers heavily and give projects reports painting very rosy pictures. The lender bank, nay, often the consortium of Banks, where huge amount of loan is granted, approve the projects and sanction the loans based on the report of the Chartered Accountants and Merchant bankers. Often, whether the loan is sanctioned and if so, the extent, all will depend on lobbying. There are large numbers of brokers who style themselves as consultants. The majority of them are ex-Bankers. They are the true wheeler dealers. They have access to the Management of the Banks at various levels and they grease the machinery, the banking hierarchy by resorting to most inappropriate means. And facilities running into thousands of crores are released. Gratification, that is the lubricant.
14.The approved valuers of the bank play not so insignificant role in defrauding the Banks and financial institutions. The Petitioners are not painting all 'valuers' or Chartered Accountants and 'Merchant Bankers' in the black. However, the Petitioners 1 to 6 as practitioners of Banking Laws, particularly SARFAESI Act, could come across many instances where properties are overvalued in astronomical terms and credit facilities granted based on such fraudulent valuation. Sometimes the secured assets are valued even more than 10times of it's actual value. And it is done with the knowledge of everyone in the system who are duty bound to act as the “check and balance” which ensure the checks and balances. The fraud as above is no matter of being in isolation. It is almost the rule. And it is really horrifying.
15.The SARFAESI Act while it leaves the scamsters and fraudulent men scot free, mercilessly liquidate the honest and the upright men and women who had availed of the credit facility from Banks since they were short of funds and had all the good intentions to repay, but for circumstance beyond their control or even anticipation could not repay on time. The Petitioners 1to6 as Banking lawyers had come across many such heartbreaking scenarios where smalltime entrepreneurs, often first generation, having availed of a loan from a banking institution being forcibly thrown out of his home and that too by virtue of an order of a Magistrate under S.14 of the SARFAESI Act, which was rendered behind his back.
16.The greatest victim of the SARFAESI Act is the honest businessman or entrepreneur who had no intention to defraud the Bank and in the honest belief that he would certainly be able to repay the loan and have mortgaged his properties, often his very home itself, which is worth many times more than the amount of the loan taken. For eg. where an entrepreneur who had availed of a loan of rupees one crore and mortgaged properties worth ten crores but is not in a position to easily liquidate the asset and raise the money to repay the bank, the Banks would go most aggressively. Because the value of the property mortgaged is far in excess of the debt and offer no difficulty in recovering. They would afford no opportunity for resolution of the debt, nay, even restructuring, but would mercilessly invoke SARFAESI Act, take forcible possession of the security and often the very residential home of the hapless borrower and sell at a price far below the market value. The Petitioners have seen from close quarters cases where a poor borrower is dispossessed of his home and got it sold in so called auction after grossly undervaluing it. The difference between the actual price and the actual price for which it was sold and the distress/ auction price for which it was sold on record are shared by the officers of the bank, the intermediaries and the so called auction purchaser. The auction purchaser too gets a share because he is able to buy the property at the reserved price which is grossly undervalued or slightly above it. The SARFAESI Act, has led to the large-scale corruption in the banking industry, the Petitioners are afraid to say.
17.The system of checks and balances in the Banking system are in operation only on paper. The auditors are primarily to be held responsible for that. There are five kinds of audit by five different entities; namely:
a)Internal-audit by the Banks own audit staff or by Chartered Accountants hired by the Bank
b)RBI’s audit by the RBI's own Audit staff
c)Statutory Audit-by practicing Chartered Accountants subject to the discipline and control of the Institute of Chartered Accountants of India.
d)C&AG Audit: by the Audit Staff of Comptroller &Auditor General of India.

Satyam scam was an eye opener for all concerned and in particular for Institute of Chartered Accountants of India (ICAI). But they learned nothing from Satyam scam where the Statutory Auditors had connived with the Ramlinga Raju, _to defraud the nation. Mallya's case is yet another instance where all the four auditors aforesaid, who were to act as the sentinels qui vivihad failed to discharge their duty. The current Nirav Modi scam is only a tip of the proverbial ice berg. It is the result of the gross and manifest failure of our institutions. The greatest challenge the country facing today is the moral decay. Corruption is manifest in all walks of life. It has become the part of our very way of life itself, frightening though.
18.The only way the rampant corruption could be dealt with is to bring about greater transparency and reform in banking. The Banking industry cannot be a cloistered virtue. All loans extended exceeding Rs.100 crore has to be subjected to independent scrutiny and where the securities given as mortgage is less than the amount of loan outstanding is required to be directed to be sufficiently covered, if need be by legislation. All such big accounts ought be subjected to forensic audit by external agencies.
19.The banking frauds, so far as the Petitioners could gather from their experience as practitioners in the banking realm, is hardly a guarded secret. When fraud as the Nirav Modi or Mallya takes place, many in the banking system would have well sensed the foul play but they don't dare to expose it for fear of dire consequences. What is therefore imperative is to put into existence a mechanism which could independently and effectively investigate banking frauds. Such a body shall consist of experts of banking, auditing, investigations so too representing the common man, the real stake holder. The CBI should more focus on Banking frauds as it's utmost priority and shall establish special departments to deal with exclusively of Banking frauds for the existing divisions are proved to be far from able to cope up to the requirement of the day.
20.The major problem the Banking Industry in India facing today is the phenomenal frauds. The fraud which Vijay Mallaya and Nirav Modi and his ilk could perpetuate because Banks advanced funds without adequate security or securities are grossly overvalued. These frauds are not committed by one or two employees in the lower ranks. But are perpetuated by the higher ups so too because of the total failure of the audit system. The fraud committed by Nirav Modi could be compared to a ‘Ponzi scheme’. The rolling over, as happened in Nirav Modi case was possible only because the LOU’s were issued without any collateral to secure the contingent liabilities. Because no reconciliation of the SWIFT Messages was made with Core Banking System. There was no audit of the SWIFT Messages. The RBI’s auditors failed to audit the SWIFT Trail while the PNB Booked the huge amounts which it received as fees towards the LOUs granted by it. The Petitioners are made to understand that, these sort of frauds are not that uncommon at all, though may not be of the great proportion as in the instant case.
21.While the Malyas and Nirav Modi’s are allowed to plunder the Public Sector Banks, namely, while they are granted Credit facilities worth thousands of crores without any collateral security, the small traders and small entrepreneurs are made to mortgage his very home or the gala or office to secure a small amount. While the big sharks- the Anil Ambani Group, Winsome Textile, Essar Steel, Bhushan Steel, et al. default thousands of crores of Rupees, the Banks instead of taking recourse to drastic steps to recover the amounts due under the SARFAESI Act, extended them further credit facilities under the various debt restructuring or resolution schemes. The small fish is dispossessed of his very home, his office, his shop or factory under the draconian SARFAESI Act. This is unjust. However, it has not received the attention of the Government, though it ought to have long before. The small fish, the small trader, artisan, small scale industries where the loan is less than 5 crores has to be excluded from the purview of the SARFAESI Act. So too a simple residential unit, the very home of the small borrower has to be excluded from the provisions of the Act. What is done in the name of SARFAESI Act rendering a small entrepreneur or small trader homeless because he could not service the account for 3 months is unjust and inhuman. It is barbaric.
22.The SARFASI Act is toothless in so far as the big fish is concerned. The RBI has been issuing various schemes for one time settlement or for restructuring or restoration of the debts from time to time. But nothing is wrong if it is done where it is justified. However, where restructuring or restoration is justified in the case of a genuine business loss or failure due to reasons beyond the control and anticipation of the Promoter, the Banks often decline it. Because the securities are in far in excess of the amount due and therefore by invoking the SARFASI Act, the debt could be recovered without any difficulty. However, where the debt is not adequately covered by collateral securities, nay, where the value of the securities are for less than that of the amount due, the Banks won’t invoke the SARFAESI Act. Because in that case no window dressing is possible and the Banks will have to make the requisite precaution for bad and doubtful debts. Therefore it is not profitable to do so for the Bank ought to show the losses in its profit and loss account. Therefore, where the assets are grossly overvalued and the collateral are bogus, the banks often restructure the account and even pumping further funds and conceal the true state of affairs from the public at large. This menace has to be put to an end. The law will have to expressly state that no Bank can advance money unless the loans are adequately covered by collateral securities, where it is in excess of say 10 crores. The law shall also provide for mechanism to deal with an iron fist the grossly over valuation of the collateral securities. There ought to be a watch dog to oversee the functioning of the Chartered Accountants since the ICAI has failed to discharge its duty as a regulator of the Statutory Auditors. In the like manner, there ought to be an effective mechanism to regulate the functioning of the “approved valuers” so too of the Merchant Bankers who are marketing the projects among various banks and financial institutions at the behest of the promoter.
23.The law should while punishing the dishonest and fraudulent, it should not be tool of harassment of the innocent. The SARFAESI Act and even the Insolvency Code while protecting the dishonest and the fraudulent, offer no protection against the persecution of the innocent. The Banks today classify a borrower as wilful defaulter. It means, in so far as an honest entrepreneur is concerned, his Civil death. But to the crafty and dishonest it is of no consequence. There is no statutory law as of today in so far as the declaration of a defaulter as a willful defaulter is concerned. The Banks do so invoking certain circulars issued by the RBI. The system where the Banker himself is the Judge of his own cause, evinces no public confidence. It is in many ways scandalous considering the propensity of the corruption prevailing in the Banking Industry. The classification of a defaulter as wilful defaulter has to be regulated by law. The Parliament has to enact law in this regard which shall provide for a fair and just, so too expeditious, for classification of a borrower as a wilful defaulter with a provision for Appeal to correct “errors within jurisdiction”. That job cannot be entrusted to the DRT. Because the DRT’s have no expertise to do so. The question is, who could then do it. The primary adjudication could be entrusted to an independent body, consisting of experts in the realm of banking, finance, economy, law, auditing and industry. An appeal thereof should lie before the civil court as is the case with many other legislations.

24.In short the Banking scams which shocked the conscience of the nation as if a nuclear explosion, at not so infrequent intervals are required to be dealt with the seriousness and urgency the same calls for. Otherwise, the very future of the nation is at stake. The 85% of the wealth of the nation being accumulated in the hands of a few will lead to social unrest if not bloody revolution. The Banking system and our economy have to be protected from those who have plundered it. The tax payers money can no longer be allowed to be used to bail out the banks, because we have allowed the banks to be plundered. Remedial measures are a crying need of the hour. Hence the instant petition under Article 32 of the constitution seeking writs in the nature of mandamus and/or directions and Order.
25.Hence, the instant Writ Petition under Article 32 of the Constitution on the following, amongst other:-

GROUNDS
Grounds in support of the reliefs sought for are fairly elaborated in the statement of facts above and hence are not repeated. The Petitioners however respectfully further adds the following.
a.The principal remedy which the petitioners seek in the instant writ petition is a writ in the nature of mandamus, a public law remedy of great antiquity and of universal application, at least insofar as the common law jurisprudence is concerned. Mandamus, though is a public law remedy could only be sought for the discharge of a public duty by a public functionary. And, insofar as Article 13(2) is convened for the enforcement of a public duty by an authority for the failure thereof entailing the violation of fundamental rights. The petitioners have felt it only appropriate to plead the said fundamental principles of constitutional law, while being fully conscious that there is no need to plead law, because of the misconception that the writ of mandamus for the discharge of public duty by a public functionary could only be by way of a so called PIL.
b.The Petitioners are taxpayers. Every citizen in this country is a tax payer, for nobody is exempt from indirect tax. The premise that only those who pay income tax, alone, could be a taxpayer is a misconception which has its foundation in feudalism. Every taxpayer, nay , citizen could, the Petitioners assert in all humility, claim to be invested in him the fundamental right that the payment from the consolidated fund of India, namely his money, shall not be allowed to be plundered, pocketed, nay siphoned off. The Government of India has since 2007, till date, pumped into the public sector banks about Rs. 1.2 lakh crores for recapitalization. The first instance was in the year 2005 or so, to salvage IDBI by a fund to the tune of Rs. 8000 crores. The parliament enacted the draconian SARFASI ACT which has resulted in thousands of small time entrepreneurs and traders who had availed of a few thousands and lakhs of rupees for their ventures and business being forcefully dispossessed of their homes, without affording them a restructuring of their facilities/loan, as they couldn’t service their accounts for reasons beyond their control. Had the banks been little considerate and granted them time, their ventures wouldn’t have been failed, they wouldn’t have been rendered homeless. The case of the farmers was still worse. Since the banks did not grant any facilities, the poor farmer had to borrow from money lenders, sometimes at 120 percent of interest. Even where the banks had granted credit facilities, the banks have shown no mercy to the farmers and sought recovery through distraint, invoking the harsh revenue recovery laws. During the last 10 years, more than 10 lakhs farmers committed suicide, all because of the deep debt trap they fell into. While the banks mercilessly took possession of even the residential homes of the small traders and entrepreneurs, yet kept on granting credit facilities without adequate securities. Sometimes, without any securities, as in the case of Vijay Malya and Nirav Modi and their ilk. The petitioners are practitioners in the banking realm and have been witnessing this, literally everyday, with bated breath. The manner in which Malya was allowed to fleece and flee the country, nay, its repetition, in Nirav Modi, in a manner even still shocking, makes the Petitioners boil their blood, and it is in the above premises that the Petitioners felt it appropriate to knock the doors of this court, not to blame the Modi govt., which some people are seen to be resorting to with immense joy; not even to blame the UPA government, during which such daylight robberies took astronomical proportions, but to seek remedial measures which are long overdue.
c.It is unnecessary for the petitioners to repeat the grounds, which they consider could justify the reliefs sought for infra, which have elaborately been dealt with, in the statement of facts. Paragraph _____, be read and treated as part of the grounds in support of the prayers sought for infra.
26.The instant Writ is not barred by the by the doctrine of estoppel res judicata.
27.The Petitioners states that the Petitioners has no other efficacious alternative remedy than to prefer the instant Writ Petition under Article 32 of the Constitution of India.
28.That the Petitioners crave leave to add, amend or alter any of the foregoing grounds with the permission of this Hon’ble Court.
29.The Petitioners has not filed any other petition, appeal or application other than the one mentioned in this petition, before this Hon’ble Court or any other High Court seeking similar reliefs as are sought in this Writ Petition.
PRAYERS
It is, therefore, most respectfully prayed that this Hon’ble Court may graciously be pleased to:
a.Issue a Writ in the nature of Mandamus or any other appropriate Writ, Order or directions, directing the Respondents to cause an investigation and to unearth the fraud of the nature which is very likely to have been perpetuated by scamsters like Nirav Modi, Vijay Mallaya in other Banks and even in the Punjab National Bank and further not to extend facilities like the Letter of Undertaking as was extended in Nirav Modi’s Case without the facilities being backed by collaterals sufficient enough to meet the contingent liabilities;

b.To issue a Writ in the nature of Mandamus or any other appropriate Writ or Order directing the Respondents to cause an audit of all funding/ guarantees based on SWIFT messages, track the SWIFT trail of all Banking operations of more than 100 crores as also to reconcile such transactions with the core Banking system;

c.To issued a Writ in the nature of Mandamus or any appropriate Writ or Order or direction, directing the Respondents No. 2 to 5 to cause an investigation into scams both from the point of view of prosecution of the offenders but also from the point of view of the total failure of the system internal checks and balances and in particular the role of the various auditors, namely the RBI, the statutory, internal and C&AG and of the Senior Management and to take such disciplinary action as warranted so too bring in drastic changes in the audit and other mechanism of checks and balances which will make fraud near impossible;
d.To issue a Writ in the nature of Mandamus or any other appropriate Writ, Order or direction to secure the deportation of Shri. Nirav Modi and Mehul Chokshi but also to take such steps to ensure that none of the promoters of the various Companies which owe thousands of crores of rupees to the nationalized banks, leave the Country and thus keep themselves beyond the reach of law as is the case with Vijay Mallaya and Nirav Modi;
e.To issue a Writ in the nature of Mandamus or any other appropriate Writ or Order or direction, directing the Union of India to create an independent body constituting of experts in the province of Banking, Accounting, Auditing, to oversee the auditing of Banks and Financial Institutions, particularly, as a watch dog of the various auditors, namely the statutory auditors appointed under the Companies Act, the internal Auditors of the Banks appointed by the Banks themselves, the Auditors of the RBI and even of the C&AG so that there are no more scams like Satyam Scam, Mallaya Scam, Winsome and Nirav Modi scams;
f.To issue a Writ in the nature of Mandamus or any other appropriate Writ or Order or direction, directing the Union of India to consider the enactment of an appropriate legislation banning of lending of money above 100 Crores with collateral securities of equal value as also to requiring that such a valuation be conducted by valuers to be appointed by the supervisory body to be created by appropriate legislation consisting of representatives of the various investigative and regulatory bodies such as the RBI, CVC, CBI, SEBI and the institute of Engineers (India) and the institute of Chartered Accountants of India and the Institute of the Cost and Works Accountants of India;
g.To issue a Writ in the nature of Mandamus or any other appropriate Writ or Order or direction, directing the Union of India to consider with utmost gravity and urgency to bring about appropriate legislation to exclude the small and medium enterprises, professionals and traders, where the extent of credit facilities availed of is less than 5 crores from the provisions of the SARFAESI Act, as also to exclude one dwelling unit (residential home) from the provisions of the SARFAESI Act, even where the credit facilities extended is more than 5 crores but less than 10 crores, provided the value of the residential home is less than 1 crore in small and medium towns and more than 2 crores in metropolitan cities;
h.To issue a Writ in the nature of Mandamus or any other appropriate Writ or Order or direction, directing the Government of India to consider the feasibility of dismantling the multiple fora as of now in existence, namely, the Authorized officer under the SARFAESI Act, the DRT and NCLT, all in substitution of the Civil Court which has led to multiplicity of proceedings and in its place to establish one single Forum which could deal with the inter se dispute between the lender and the borrower and thereby eliminate multiplicity of proceedings and bringing finality of litigation, nay, res judicata;

i.To issue a writ in the nature of mandamus or any other appropriate or any other appropriate writ or Orders or direction, directing the Union of India to consider the feasibility of denationalizing all the Public Sector Banks so that the Tax payers money is no longer required to be invested for recapitalization of the public sector Banks which had allowed its very foundation to be eroded by failing to prevent banking fraud and bad loans which have reached astronomical proportions;
j.To issue a writ in the nature of mandamus or any other appropriate writ or orders or direction, directing the Union of India to consider the feasibility of even enacting an ordinance banning the promoters of Companies which owe the Banks and in particular the Nationalized Banks more than 100 crores, from leaving the country without the prior permission of the Government of India / the Competent authority to be so authorized;
k.To issue a writ in the nature of mandamus to direct the Union of India to consider the desirability of enacting a law of classification of borrowers as wilful defaulters where the borrowers has resorted to fraud and diversion of funds and to disentitle him not only of access to public funds but even to travel out of India with adequate mechanism for Appeal against such orders by the person aggrieved in order to correct the “error within jurisdiction”;
l.To grant such other and further writs or Orders and directions which this Hon'ble Court may most graciously be please to grant.

AND FOR THIS ACT OF KINDNESS THE PETITIONERS AS IN DUTY BOUND SHALL EVER PRAY:
DRAWNBY:: FILED BY::

MATHEWS J.NEDUMPARA RABIN MAJUMDER
Advocate Code No.1825
New Delhi.
Drawn on:18.02.2018
Filed on: 21.02.2018

IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CRL.) NO.________OF 2018
IN THE MATTER OF

MATHEWS J.NEDUMPARA AND ORS. …..Petitioners
VERSUS
THE UNION OF INDIA & ORS. ...Respondents
A F F I D A V I T
I, Mathews J.Nedumpara, aged 59 years, S/o Joseph Nedumpara, residing at: Villa No11, Tudor Villas, DD, Padam Road, Vaduthala, Cochin, Kerala-682 023., Presently at _____________, do hereby solemnly swear and affirm as follows:-
1.That I am the First Petitioner in the above Writ Petition. I am fully conversant with the facts and circumstances of the case and hence, I am competent to swear this affidavit.
2. I state that I have read and understood the contents of the accompanying petition, Synopsis & List of dates. The contents of the same are true and correct to the best of my knowledge and belief.
3. I state that that the Annexure, filed with the Writ Petition are true and correct copies of their respective originals.
DEPONENT
Verification
I, the Deponent above named, do hereby verify and state that the contents of the Affidavit are true and correct to my knowledge and belief. No part of it is false and nothing has been concealed there from.
Verified at __________ on this the ___ day of February, 2018.

Place: ____________ DEPONENT

IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CRL.) NO.________OF 2018
IN THE MATTER OF

MATHEWS J.NEDUMPARA AND ORS. …..Petitioners
VERSUS
THE UNION OF INDIA & ORS. ...Respondents
A F F I D A V I T
I, A.C.Philip, S/o A.G.Chacko, Aged 43 years, S/o A.G.Chacko, residing at # 89, ShreshtraVihar, New Delhi-92,, Presently at New Delhi, do hereby solemnly swear and affirm as follows:-
1.That I am the second Petitioner in the above Writ Petition. I am fully conversant with the facts and circumstances of the case and hence, I am competent to swear this affidavit.
2. I state that I have read and understood the contents of the accompanying petition, Synopsis & List of dates. The contents of the same are true and correct to the best of my knowledge and belief.
3. I state that that the Annexure, filed with the Writ Petition are true and correct copies of their respective originals.
DEPONENT
Verification
I, the Deponent above named, do hereby verify and state that the contents of the Affidavit are true and correct to my knowledge and belief. No part of it is false and nothing has been concealed there from.
Verified at New Delhi on this the ___ day of February, 2018.

Place: New Delhi DEPONENT

IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CRL.) NO.________OF 2018
IN THE MATTER OF

MATHEWS J.NEDUMPARA AND ORS. …..Petitioners
VERSUS
THE UNION OF INDIA & ORS. ...Respondents
A F F I D A V I T
I, RohiniM.Amin, W/o Mr.MohitAmin, Advocate, Adult, Indian, residing at: B/705, Nirman Apts.,   R.J Marg, Vikas Nagar, Pump House, Andheri (East), Mumbai- 400 093,Presently at _____________, do hereby solemnly swear and affirm as follows:-
1.That I am the third Petitioner in the above Writ Petition. I am fully conversant with the facts and circumstances of the case and hence, I am competent to swear this affidavit.
2.    I state that I have read and understood the contents of the accompanying petition, Synopsis & List of dates. The contents of the same are true and correct to the best of my knowledge and belief.
3.    I state that that the Annexure, filed with the Writ Petition are true and correct copies of their respective originals.
DEPONENT
Verification
I, the Deponent above named, do hereby verify and state that the contents of the Affidavit are true and correct to my knowledge and belief. No part of it is false and nothing has been concealed there from.
Verified at __________ on this the ___ day of February, 2018.

Place: ____________ DEPONENT

IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CRL.) NO.________OF 2018
IN THE MATTER OF

MATHEWS J.NEDUMPARA AND ORS. …..Petitioners
VERSUS
THE UNION OF INDIA & ORS. ...Respondents
A F F I D A V I T
I, C.J.Joveson, aged ___ years, S/o ___________, residing at: Cheruvathur House, Near Block A 335, Rabindranath Tagore Road, Kurla Camp, Ulhasnagar- 421004, District Thane, Maharashtra, Presently at _____________, do hereby solemnly swear and affirm as follows:-
1.That I am the Fourth Petitioner in the above Writ Petition. I am fully conversant with the facts and circumstances of the case and hence, I am competent to swear this affidavit.
2. I state that I have read and understood the contents of the accompanying petition, Synopsis & List of dates. The contents of the same are true and correct to the best of my knowledge and belief.
3. I state that that the Annexure, filed with the Writ Petition are true and correct copies of their respective originals.
DEPONENT
Verification
I, the Deponent above named, do hereby verify and state that the contents of the Affidavit are true and correct to my knowledge and belief. No part of it is false and nothing has been concealed there from.
Verified at __________ on this the ___ day of February, 2018.

Place: ____________ DEPONENT

IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CRL.) NO.________OF 2018
IN THE MATTER OF

MATHEWS J.NEDUMPARA AND ORS. …..Petitioners
VERSUS
THE UNION OF INDIA & ORS. ...Respondents
A F F I D A V I T
I, .AnjanSinha,, aged _______ years, S/o __________, residing at: __________., Presently at _____________, do hereby solemnly swear and affirm as follows:-
1.That I am the Fifth Petitioner in the above Writ Petition. I am fully conversant with the facts and circumstances of the case and hence, I am competent to swear this affidavit.
2. I state that I have read and understood the contents of the accompanying petition, Synopsis & List of dates. The contents of the same are true and correct to the best of my knowledge and belief.
3. I state that that the Annexure, filed with the Writ Petition are true and correct copies of their respective originals.
DEPONENT
Verification
I, the Deponent above named, do hereby verify and state that the contents of the Affidavit are true and correct to my knowledge and belief. No part of it is false and nothing has been concealed there from.
Verified at __________ on this the ___ day of February, 2018.

Place: ____________ DEPONENT

IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CRL.) NO.________OF 2018
IN THE MATTER OF

MATHEWS J.NEDUMPARA AND ORS. …..Petitioners
VERSUS
THE UNION OF INDIA & ORS. ...Respondents
A F F I D A V I T
I, Amrit Pal Singh, aged ____ years, S/o _________, Residing at 201/202 Pleasure Park, Opp. Pinto Park, O.T Section, Ulhasnagar- 421 003, District- Thane, Maharashtra State. Presently at _____________, do hereby solemnly swear and affirm as follows:-
1.That I am the Sixth Petitioner in the above Writ Petition. I am fully conversant with the facts and circumstances of the case and hence, I am competent to swear this affidavit.
2. I state that I have read and understood the contents of the accompanying petition, Synopsis & List of dates, and the application seeking permission to file and prosecute the above writ petition as party-in-person. The contents of the same are true and correct to the best of my knowledge and belief.
3. I state that that the Annexure, filed with the Writ Petition are true and correct copies of their respective originals.
DEPONENT
Verification
I, the Deponent above named, do hereby verify and state that the contents of the Affidavit are true and correct to my knowledge and belief. No part of it is false and nothing has been concealed there from.
Verified at __________ on this the ___ day of February, 2018.

Place: ____________ DEPONENT

Dated :__.02.2018
To
The Registrar
Supreme Court of India,
New Delhi.

Subject :
IN THE SUPREME COURT OF INDIA
WRIT PETITION (CRL.) NO.________OF 2018
IN THE MATTER OF
MATHEWS J.NEDUMPARA AND ORS. …..Petitioners
VERSUS
THE UNION OF INDIA & ORS. ...Respondents

Sir,

I hereby authorize Shri.A.C.Philip/Shri. Anjan Sinha/Mr.Sonu Beniwal, to file, re-file, to apply for and obtain the proceedings along with the entire case and also to do the needful in the registry in the above mentioned case.

Thanking you
Yours sincerely,

(Rabin Majumder)
Advocate On Record

Rabin Majumder
Advocate On Record
Supreme Court of IndiaChamber No.___
Supreme Court Campus.
nudelhilawfora@gmail.com
09899259811

Dated :__.02.2018
To
The Registrar
Supreme Court of India,
New Delhi.

LETTER OF URGENCY
Subject :
IN THE SUPREME COURT OF INDIA
WRIT PETITION (CRL.) NO.________OF 2018
IN THE MATTER OF
MATHEWS J.NEDUMPARA AND ORS. …..Petitioners
VERSUS
THE UNION OF INDIA & ORS. ...Respondents
Sir,
The instant petition is in the realm of Banking Scam, which has eroded public money and confidence from the Banking and Financial system. The authorities have already filed proceedings, and other charge sheets, which are inadequate to control this unprecedented corruption and malpractices. Any delay in causing the right directions to the investigation can cause the witnesses influenced, threatened or even eliminated, the evidences manipulated and tampered resulting into the escaping of criminals. The entire citizens of this great nation are directly affected by these scams.
The public confidence in the system is very much important and is the foundation of it's existence, more importantly for the financial sector. Hence the above petition is urgent in it's nature, lest great inequity will be the fate accompli.
Hence the urgency.
Thanking you
Yours sincerely,

(Rabin Majumder)
Advocate On Record
IN THE SUPREME COURT OF INDIA
WRIT PETITION (CRL.) NO.________OF 2018
IN THE MATTER OF
MATHEWS J.NEDUMPARA AND ORS. …..Petitioners
VERSUS
THE UNION OF INDIA & ORS. ...Respondents
DECLARATION

All defects have been duly cured. Whatever has been added/deleted /modified in the petition is the result of curing of defects and nothing else. Paper books are complete in all respects.

RE-FILED BY::

Rabin MajumderAdvocate On Record

MATHEWS J.NEDUMPARA RABIN MAJUMDER
Advocate Code No.1825
New Delhi.
Drawn on:18.02.2018
Filed on: 21.02.2018

IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CRL.) NO.________OF 2018

BETWEEN
MATHEWS J.NEDUMPARA AND ORS. …..Petitioners
VERSUS
THE UNION OF INDIA & ORS. ...Respondents

P A P E R – B O O K
[FOR INDEX KINDLY SEE INSIDE]

ADVOCATES FOR THE PETITIONERS:RABIN MAJUMDER

RECORD OF PROCEEDINGS

SL.NO. DATE OF RECORD OF PROCEEDINGS PAGE(S)

INDEX

PROFORMA FOR FIRST LISTING
SECTION –X
The case pertains to (Please tick/check the correct box):

Date: ____thFebruary,2018Rabin Majumder,
Advocate on Record for the petitioner(s)/appellant(s)
Code:1825
E mail: nudelhilawfora@gmail.com
Mob:9899259811

THE LIST OF DATES

Saturday, February 17, 2018

What actually happened in PNB scam? Let’s start from the concept.

First, The Concept

Let’s understand how things work.

Some importer, let’s call him Nirav Modi or NM, wants to import pearls or diamonds and then sell them. The purchase requires money, so NM approaches a bank, say Punjab National Bank (PNB).

PNB says look, I’ll give you a loan but it will be like at 10%.

NM thinks hard and says, no, that’s too much. Wait, why don’t I take a foreign currency loan instead, after all I’m buying in dollars? Much lower interest rates no? I can get at LIBOR+2% and LIBOR is like 1.5% so I’ll have the money at 3.5%!

But who will give NM a foreign currency loan? A bank abroad? They don’t know NM. They don’t have any history of NM, so why will they give him money?

SO NM goes to PNB and says, boss, you’re my banker, so please help some foreign bank give me some money to buy diamonds. Say that you will guarantee my loan by giving me a “Letter of Undertaking” (LOU).

PNB now should be saying look, if you want me to give Rs. 100 cr. guarantee, you give me stuff worth 110 cr. at least. As collateral.

But PNB, for some strange reason, doesn’t ask for collateral. More on that later.

So now the foreign bank is ready to lend NM the money. Because PNB will guarantee it. And the foreign bank trusts PNB. Why does it trust PNB?

Because PNB sends a message on SWIFT – the banking message service – that PNB guarantees Rs. 100 cr. of money for 180 days for Mr. NM at an interest rate of, say, LIBOR + 2%. It’s like a message – written in stone, effectively – that says PNB will pay if NM doesn’t pay.

In fact the foreign bank trusts only PNB. So it gives the money to PNBs account with it, called by PNB as a “Nostro” – the account that PNB maintains with banks abroad, where the other bank will send money meant for PNB customers.

PNB’s nostro account gets the money.

PNB then gives NM the money from the Nostro account, usually paid off to whoever NM is buying his diamonds from. This payment is to someone outside India usually, to fund a purchase of diamonds or whatever.

Note this carefully: The other bank gives money to PNB’s Nostro account. Not to NM. They don’t care about NM. They only know that PNB has given a guarantee on the SWIFT channel.

Note: the other bank is nowadays mostly the foreign branches of Indian banks. Because the phoren banks have realized something sinister – that PNB’s guarantee is a strange beast that isn’t backed with much, but we’ll come to that

The foreign bank couldn’t care less about whether NM was buying diamonds or bitcoin – to them, PNB would pay back even if NM’s bitcoin wallet got stolen.

Why does PNB give a guarantee? Fees. Each year, a bank may charge upto 2% to give the LoU.

So What Happens When It’s Time To Pay Back?

NM has to get the pearls in India, sell them, receive the money and pay PNB. On the due date written on the LoU.

Then PNB will pay back the foreign bank saying okay, we got the customer’s money so we’re giving it back to you. With interest etc.

That’s what is supposed to happen. But in reality, things went a little berserk, it seems.

The Reality: A Bit of a Ponzi

NM might not pay back at all. NM might use the money to speculate in the markets. Or do something else.

What if NM in the above example simply didn’t have the money to pay back? Instead, he asks a PNB official to open ANOTHER LoU. For the amount owed plus interest. So if we had the first LoU at $10 million the second one is $11 million to cover the interest on the first.

The money from the second LoU is used to repay the first. It’s just rolling over of credit. Over and over. Standard definition of a ponzi scheme.

This can easily balloon into a larger amount, so large that it’s too much. In effect many such arrangements have turned into semi-ponzi schemes, with one LoU being opened to repay another and so on.

Which is what is likely to have happened.

We don’t know the details, but it looks like:

Nirav Modi took loans from foreign branches of Indian banks through an LoU issued by PNB

This was done through a SWIFT based LoU issued through a rogue employee (or many of them) at PNB

The orders never showed up in the core banking system for monitoring

LoUs were rolled over all the way since 2011, and possibly increased over time too.

The rogue official retired in 2017, and the replacement refused to roll over the LoU which came due in Jan 2018 because he couldn’t find the past transactions in the system

No rollover means a default, since there was no money to pay. So PNB quickly files an FIR saying oh goodness we have lost 280 cr. on the Jan LoUs

Then someone said, “Abeyaar, is there more of these not-in-system LoUs? Someone check no?”

Then someone checked.

Oh gawd. 11,400 crores.

That’s a lot of crores.

Everyone in the bank panicked.

Why couldn’t Nirav Modi just pay it back? He must have the original money no?

Because if it was ever intended to be paid back, the rollovers wouldn’t have been required. At some point, things got so out of hand that rollovers were required in order to stay current.

Typically this would not be a problem. If PNB had done things right, they would have had collateral worth the amount of guarantee, and they would have sold that collateral and paid the foreign bank.

But, and here’s the real issue: PNB didn’t have any collateral.

Why did PNB give a guarantee without collateral?

If you and I go for a loan to a bank, they’ll ask us for income proof, and collateral. Only small tiny personal loans and credit card loans come backed without collateral. For something of the order of 11,000 cr. you would think they would ask for collateral.

Especially after the scene with Mallya where loans to Kingfisher were given on nearly no collateral (though even there they had a house and some promoter shares pledged)

Why did PNB give this guarantee then? It’s typical – banks give guarantees for more the amount you give as collateral. Because business relationships etc. And then:

Because nearly every bank is doing it.

The loan was not a “fund based limit”. In a fund based limit like a term loan, the bank pays out money. In non-fund-based limits, the bank will only pay if someone else defaults or an event happens – like a Bank Guarantee or an LC or an LoU.

Meaning, PNB assumed that the foreign bank was giving a loan directly to Nirav Modi and that PNB needed to pay only in case Nirav Modi defaulted. So in the eyes of PNB it was always an “non-fund-based” loan.

But this is how a significant part of import financing works. They all rollover credit, and they all use LoUs for much higher than they can offer as collateral.

From my sources, the scale is huge. For every Rs. 100 that a bank has collateral, they will easily provide LOUs for upto 6x the amount. This is a real problem – that most public sector banks do not keep much collateral against non-fund-based limits given to importing customers.

So even if a bank has collateral, it’s nowhere near enough. And then, such unfunded liabilities are not even reported to RBI!

Basel Reporting: No Disclosure

PNB has “unfunded” exposure of 11,000 cr. they say. But they don’t even reveal it in their latest Basel III disclosure:

The funded exposure to “Gems and Jewellery” is shown at 1860 cr.

Unfunded to the same sector: 842 cr.

This doesn’t even add up. So, in effect, PNB didn’t reveal that it was funding massive quantities of “unfunded, contingent exposure”. They will of course pretend that they didn’t know, because the transactions weren’t in the core banking system.

Did Employees Hide it? Was PNB Responsible or was it a fraud?

Can employees be responsible? Could they have hidden the credit and the rolling over of LoUs? But honestly, how does a 11,000 cr. credit pass muster without top management realizing it?

Think of it – your nostro account with these other banks keeps getting big credits that add up to 11,000 cr. Will you not reconcile it in the accounting? The “why is this money even here?” question should have been asked by someone who audits accounts, one thinks?

And the SWIFT messages. It’s a specific kind of message. Why wouldn’t PNB audit the SWIFT trail? Reconcile it with the core banking system? How many more such skeletons will tumble if they do?

Their excuses are

Data wasn’t entered into the core banking system. (Of course, otherwise you would have had to report it)

LOUs weren’t authorized. (Hard to believe, because the amounts are very large. Surely someone on the top would know?)

The SWIFT system was illegally used. (Again, hard to believe that a bank like PNB would not audit its SWIFT messages regularly. Or its auditors. Or RBI.)

On the face of it, it looks like the ex-employee is being used as a scapegoat. It’s likely that a lot of people were in on this thing. And that it generated massive, fat fees for PNB all these years.

Fees wise: Imagine 11,000 cr. worth LoUs being renewed each year – that’s upto Rs. 200 cr. in fees that was all hitting PNB’s top line. You could bribe an employee to maybe give you a small increase – say 10-20 cr. but when you hit numbers like 11,000 cr. this is surely something the top management would know.

What’s the Scale of this scam?

While PNB reported it as a 11,000 cr. scam, they filed an FIR with the CBI for only Rs. 280 cr. This has probably expanded since then but even if the total outstanding is as much as that, there’s a good chance that the actual loss amount will be lesser.

All of it will be borne by PNB right now. Whether someone abused their SWIFT usage is not relevant, if PNB’s SWIFT message said they will pay, they have to pay if there is a default.

But think about the fallout. The problem was that some liabilities were not in the system. There could be more such LoUs. From the same branch or others. Other banks could have such LoUs too. It’s trivial to start looking – and we know that Nirav Modi will not be an isolated case.

Also, the issue was that the limits had no collateral behind them. If all banks are told to verify their non-fund-based limits and demand collateral against them (say at least 25%) then the scale would be absolutely massive. It’s not like this is happening only with Nirav Modi or Choksi. A very large number of importers of commodities have been doing this, and rotating credit. A change in regulation here can change the game dramatically for every other bank (and import account) in the system.

The simple point: this particular transaction will result in a lower loss than 11,000 cr. for PNB. Because of recoveries and such. But if RBI asks all banks to pull up collateral on such lending and stop such practices, the scale is many times larger.

What about the PNB stock?

It’s fallen 17%. But note that it already has 60,000 cr. of gross NPAs. Another 11,000 cr. will hurt it but not kill it. It won’t die – the government will take it over. Shareholders might suffer, but come on as a shareholder of a public sector bank you’re used to suffering.

The problem really is: There is never just one cockroach. When you go deeper, you are likely to find more dirty, dark secrets, and none of them will be any good.

PNB is gonna hurt for a while, but so are others who will find their books similarly tarnished once they investigate.

Will This Bring The Market Down?

Have you been living under a rock? Nothing will ever bring the market down, nowadays.

But the one thing that does bring markets down is the outflow of liquidity. What if so much of the “ponzi” credit – essentially money that was rolled over very month – is being invested directly, or indirectly, into stocks? If RBI tightens up, liquidity will pull money out of stocks, and that will hurt.

Of course, this hurts the fiscal deficit since PNB has to be rescued. So bond yields are up to 7.6% and therefore we’d avoid any long term funds or bonds. Short term it will have to be.

But overall, we wouldn’t worry too much. Just react, don’t predict. What would you do if stocks fell? Better to answer that than to say they will, or they will not.

(And no, not buying PNB)

Our View: Fix it.

This is the Indian public sector banking system. Fix it.

How can you have transactions on SWIFT outside CBS? Fix it.

Why would you not reconcile the nostro accounts? Suspend the auditors. Fire top management. Fix it.

Closing the door behind Modi, who’s already left the country, is probably useless. If you find fraud, invoke their personal guarantees, and file cases to attach their personal properties. After that, file in NCLT to make these companies insolvent. Take the hit, and try to recover.

Find out more such instances where collateral cover is too low. Find out if the LoUs or LCs are just getting rolled over or is the customer actually paying back through the Indian current account. And if not, demand more collateral to avoid further spread of the ponzi.

But this is quite unlikely to happen because the banking system is going to take massive hits now, and we’re going to have to deal with the fallout of really horrible systems. It’s amazing that our banks have been this lax, but they have been allowed to; with no bankers being investigated, the rot inside the banks has been ignored and instead, industrialists have been the target of outrage. It’s time to look at banks as malicious players too, and to fix that rot.j