Exclusive: Fugitive Sandesara of Sterling Biotech Dictates Terms to Indian Public Sector Banks
Remember the four politically powerful promoters of the Sterling Biotech group (Nitin Sandesara, Chetankumar Sandesara, Dipti Chetan Sandesara—and Hiteshkumar Patel) who have been absconding from India after running up Rs15,600+ crore of bad loans? They continue to manipulate the judicial system, string banks along and, now, have come up with a proposal to delay their one-time settlement (OTS) of Rs2,638 crore to December 2021.
 
This is the balance after paying up a pittance of Rs181 crore as part of their Rs3,100 crore settlement that the National Company Law Appellate Tribunal (NCALT) had said should be completed by 31 March 2020 to avoid liquidation. Why are these Gujarat-based promoters treated so differently from all other borrowers who have faced traumatic losses in the COVID lock-down? And why the sharp contrast from liquor baron Vijay Mallya who has offered full repayment with interest, or even from small borrowers who want the moratorium on their bike loan extended?
 
Without holding any brief for Mr Mallya, who thought he could get away with loan defaults and manipulate the system, it is worth comparing the two situations. 
 
Bankers, who do not even respond to Mr Mallya’s offers, invite fugitive Nitin Sandesara to an online meeting on 3 July 2020 where he renegotiates OTS terms, already approved by the NCLAT. He proposes a shocking one-year delay in payment to December 2021 and still won’t reveal the source of money, other than a vague assurance that it is not fruit of a crime.
 
Moneylife has accessed a letter of Nitin Sandesara to Union Bank of India, dated 16 July 2020 where he outlines why he wants to delay payment that had to be made on 31 March 2020 plus 30 days. 
 
The suspected collusion by the bank consortium is evident even in long delay in sanctioning the OTS. While some members of the consortium sanctioned it in 2018-19 when Mr Sandesara began his dubious negotiation from hiding, a few sanctioned it only in February 2020. So Mr Sandesara wants to wangle at least six months’ time from the last sanction, plus use the excuse of a COVID-related business disruption which is not available to law-abiding, taxpaying Indians. 
 
His letter (posted below), shows that the Sterling group has also approached the Supreme Court to buy more time to make the payment, and this is also being used to his advantage. He writes that things will return to normalcy by the end of this year and his mystery investor will pay up the balance 90% of the OTS (Rs2,638 crore) only in December 2021. 
 
Meanwhile, he offers a few more crumbs to banks that only offer evidence of the special treatment to the group. First, he asks banks to distribute his two-tranche payment of Rs204 crore among themselves and then divvy up another Rs120 crore lying in a current account of Andhra Bank among themselves keeping a sum of Rs10 crore as cash balance. Why has the money not already been appropriated by banks and is still lying untouched for him to offer up years after absconding? 
 
Mr Sandesara also wants Sterling Biotech out of the purview of the resolution professional so that it can be run more professionally under ‘bank management’ and generate positive cash-flows. Since banks do not run companies, it probably means that Mr Sandesara will be running Sterling Biotech by proxy with tacit approval of the banks. Also, if he is so confident it will generate a ‘cash surplus of Rs40 crore each month’ amounting to ‘an auto recovery of Rs480 crore a year’, why did he flee India with family after a group default of over Rs15,600 crore? 
 
Another scandalous detail that he mentions is that the liquidators are allegedly ‘pursuing their own interest’ and have put the liquidation value of this company at just Rs300 crore. Isn’t this astonishing? A company that can ‘auto generate’ Rs480 crore a year with a small tweak in management—according to Nitin Sandesara—cannot find bidders who will pay more than Rs300 crore as liquidation value? Are potential bidders scared to bid? Surely, bankers who lend massive sums to the group are aware of what is going on.
 
Mr Sandesara ends by asking the banks’ support to help clear his name by paying the “full amount, which is the 100% book overdue on the date of NPA of the bank.” This is dubious word play. Sterling Biotech alone owed Rs8,100 crore to banks and is paying back only 65%. The group owes Rs15,600 crore to financial creditors, much of which will be written off without proper recovery effort, as we will see later. 
 
Mr Sandesara’s letter notes that banks will not even get 15% of the money, if they do not accept his deal. This again is false, since banks are making no effort to follow up on his profitable oil business in Nigeria and the money trail to the US, even though they have secured those dues and have a legal case to make. The worry is that the Sterling OTS will open the doors to other fugitive industrialists of companies like Gitanjali Gems, Winsome Diamonds, etc, who are not being pursued anymore. 
 
Remember, the Sterling group is under investigation by the Central Bureau of Investigation (CBI), enforcement directorate (ED) and the serious frauds investigation office (SFIO) for fraud and money laundering. And, yet, the absconding promoter is instructing banks about tiny sums of money in his companies as though it is business as usual. It will be instructive to see whether banks treat small and medium borrowers, whose businesses have been destroyed by COVID, with similar kindness. 
 
Our national investigation agencies also seem to be watching from the sidelines.  SFIO, I learn, has recently started gathering details about Sandesara group companies but ignores action against their Nigerian operations and the money trail to the US that was published by us. 
 
 
Meanwhile, individuals such as Captain Sukhpal Singh, with experience in maritime and oil industries, are doggedly pursuing the Sterling case through applications under the Right to Information (RTI) Act. In a letter to finance minister (FM) Nirmala Sitharaman dated 2 May 2020, Captain Sukhpal Singh alleges that Indian banks, “despite having first ranking charge on the present and future movable and immovable assets of SEEPCO (Sterling Oil Exploration & Energy Production Company Ltd), Nigeria, are not taking any steps to implement their rights over these assets.” The global companies of the group include: Sterling Global Oil Resources Pvt Ltd Mauritius (SGORPL), Sterling Biotech Limited (SBL), Sterling SEZ & Infrastructure Limited (SSEZ), Sterling Port Limited (SPL) and PMT Machines Limited (PMT), and banks had, in the past, extracted some hold over their resources for failure to pay Indian loans.
 
 
Captain Singh has also written to the governor of the Reserve Bank of India (RBI), Shaktikanta Das, and every bank chairman in the consortium. So they cannot pretend not to have heard from this whistleblower.
 
Captain Sukhpal believes there is a lot that Indian banks can do to recover their money, instead of pretending they will get only Rs300 crore, if they do not accept Mr Sandesara’s deal. The Nigerian companies are doing well and Indian banks have legal rights over their assets and can even seize consignments ‘at the place of discharge’. Then, why aren’t banks acting to protect their interests? There is no mention of this in the discussion with Mr Sandesara. 
 
Are banks pursuing their own dubious agenda or are there political forces that are working at facilitating the re-entry of the Sandesaras into India as legitimate industrialists? 
 

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    COMMENTS

    kiranshah254

    3 months ago

    Even God can not save PSU banks. This fraud is going on most PSU banks. One more Q. is that BJP honchoes may be hands-in gloves with Sandesaras but Why Congress & RG are silent ? Most of their agendas are phoney & the grass root workers in Congress & the common citizenry do'nt understand their moves at all.

    Newme

    3 months ago

    India is run Banias and Brahmins. No one can take action against these two.
    IL&FS Parthasarathy is comfortably settled in USA after looting 1 lakh crores.

    s5rwav

    3 months ago

    Empowered Judges of India sitting at High Courts and Supreme Court of India seem Comfortable with Loot of Public Money of Thousands of Crores and also seem least interested in Criminal Prosecution of the Culprits like Sandesaras and Kamath and Kochhars. I am Babubhai Vaghela from Ahmedabad. Thanks.....

    Meenal Mamdani

    3 months ago

    Looks like the mafia from Gujarat is getting cover from politicians from Gujarat. Who are these high level Gujarati politicians? Sounds like corruption, doesn't it? Wasn't BJP saying that Congress is corrupt? Not a word from BJP now their members are feeding at the trough.

    AJ_AJ

    3 months ago

    What exactly is the link between the Sterling group and politicians?

    sundar_ramang

    3 months ago

    Great article as usual by Sucheta Dalal..I doubt if India will ever improve in my lifetime..Corruption is all pervasive..

    mahesh.kalkar

    3 months ago

    Moneylife continues to do great service.

    Both BJP & Congress support this absconding group, it appears

    RBI asks urban co-operative bank to implement system-based asset classification
    The Reserve Bank has asked urban co-operative banks to implement system-based asset classification.
     
    The move is expected to improve the efficiency, transparency and integrity of the current asset classification system in UCBs.
     
    Accordingly, system-based asset classification is a better process to reflect a bank's actual financial health in its balance sheet.
     
    The RBI on Wednesday said that UCBs having total assets of Rs 2,000 crore or above as on March 31, 2020 shall implement system-based asset classification with effect from June 30, 2021.
     
    "UCBs having total assets of Rs 1,000 crore or above but less than Rs 2,000 crore as on March 31, 2020 and having self-assessed themselves as being under 'Level III or Level IV' ... on Comprehensive Cyber Security Framework for UCBs shall implement system-based asset classification with effect from September 30, 2021."
     
    As per RBI, for smooth implementation of the system: "All concerned UCBs may conduct pilot or parallel run and evaluate the results for accuracy or integrity of the asset classification in compliance with the applicable RBI instructions so as to ensure that they are ready for implementation of the system-based asset classification from the appointed date."
     
    "UCBs not meeting the above criteria are also encouraged to voluntarily implement the system-based asset classification in their own interest," RBI said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Bank of Maharashtra Writes Off Rs7,100 Crore Bad Loans; Recovers Just 4% in 8 Years
    Bank of Maharashtra (BoM) has written off bad loans of over Rs7,402 crore in the past years, while recovering a paltry 4% in over eight years from recovery efforts. Like in the case of State Bank of India (SBI) and Bank of Baroda (BoB), where Moneylife had exposed similarly large write-offs and pathetic recoveries, this again underlines how the massive ‘technical’ write-offs by banks are never recovered and made good by the exchequer through frequent recapitalisation of banks. It also debunks the aggressive posturing by government and policy-makers about recovery efforts after such write-offs. 
     
    According to information that has been provided by BoM to social activist Vivek Velankar, the lender wrote off bad debt worth Rs7,402 crore during four out of past eight years, while recovering just Rs253.55 crore. This information pertains only to loan accounts of Rs100 crore and above.
     
    "Over the past eight years, between FY2011-12 to FY2019-20, Bank of Maharashtra has written off bad loans worth Rs14,641 crore. Out of this Rs7,402 crore loans were from big defaulters with loan amount of Rs100 crore and more. However, the bank just managed to recover Rs253.55 crore as on 31 March 2020," Mr Velankar says.
     
     
    Mr Velankar, president of Pune-based Sajag Nagrik Manch, has been assiduously exposing the details of written off loans, especially by public sector banks (PSBs). Since he could not procure this information under the Right to Information (RTI), he used his rights as shareholder and asked for it as question for the annual general meeting (AGM) of SBI, BoB and BoM.
     
    "I had asked information about total loans written off from BoM, but I was told to check its annual reports from the website. After studying reports for the past four years, I found in FY19-20, the Bank had written off Rs5,697 crore, Rs5,127 crore in FY18-19, Rs2,460 crore in FY17-18 and Rs1,357 crore in FY16-17. These amounts are total loans written off by the Bank. This means during these four years, Bank of Maharashtra had shown lower non-performing assets (NPA) as these were shown as written of debt," Mr Velankar says.
     
    "Basically, there is no control on banks either by the Reserve Bank of India (RBI) or the finance ministry," the RTI activist says, adding, "In fact, since these are written off debts and are no longer part of the balance sheet of the banks, nobody really keeps an eye on this and banks are taking undue advantage of this. It also shows how these PSBs who talk big about transparency are more keen on hiding things from public view."
     
    Mr Velankar says, "From my own experience of three PSBs, I can say all big claims about strict adherence to recovery of written off loans are hollow. The information provided to me as a shareholder by SBI, BoB and BoM proves that something is not right the way bad loans are written off and almost no efforts are being made to recover these loans."
     
    The information provided by Bank of Maharashtra to Mr Velankar, shows that for four financial years, during FY11-12, FY12-13, FY14-15 and FY15-16, the lender has not written off any bad loan of Rs100 crore and above and there is also no recovery. 
     
    For FY13-14, BoM wrote off Rs275.12 and recovered Rs1.74 crore. For FY16-17, it wrote off Rs466.58 crore and recovered Rs121.67 crore. Next year the amount of written off debt jumped more than twice to Rs1,024.69 crore with a paltry recovery of Rs1.88 crore in FY17-18. During FY18-19, BoM wrote off bad debts worth Rs2,096.52 crore while recovering just Rs124.94 crore. In FY19-20, while the amount of written off debts jumped to Rs3,539.67 crore, Bank of Maharashtra could manage to recover just Rs3.32 crore. 
     
    Technically speaking, when debts are written off, they are removed as assets from the balance sheet because the bank does not expect to recover payment.
     
    This practice is frowned upon by experts but is routinely done by banks as part of their tax management clean-up process. The beneficiaries are invariably some of our biggest industrialist defaulters. 
     
    In contrast, when a bad debt is written down, some of the bad debt value remains as an asset because the bank expects to recover it. However, as SBI, BoB and now BoM have shown, most of the times, there is no recovery or negligible recovery for the amounts written off.    
     
    As reported by Moneylife, from 2012 to 2020, BoB had technically written off 97 accounts with bad debts of Rs100 crore and more. These add up to Rs21,476.89 crore over eight years, while recovery in that same period is just 4.91% or Rs1,056.53 crore. (Read: Bank of Baroda Follows SBI, Writes Off Rs21,474 Crore in Bad Loans; Recovers only Rs1,057 Crore in Past 8 Years)
     
    Similarly, from FY12-13 to FY19-20, SBI, the country's largest lender, wrote off bad loans worth Rs1.23 lakh crore of bad debt but recovered paltry Rs8,969 crore. (Read: SBI Writes Off Rs1.23 Lakh Crore of Bad Debt, Recovers Paltry Rs8,969 Crore in 8 Years!)
     
    At present, there are 19 PSBs and Mr Velankar had obtained information from only three of them where he is a shareholder. If just three PSBs can write off bad loans worth thousands of crores with paltry recovery, imagine what would be total loans written off by all State-run lenders? 
     
    And this is public money that is kept in banks by common savers, including senior citizens, among others. If PSBs are writing off huge amounts of loans with miniscule recovery, how can we assure the common customers that their hard-earned money is safe?
     
    A few months ago, there were lot of heated arguments about written off loans of big defaulters. In April, RBI had said that Indian banks have technically written off a staggering amount of Rs68,607 crore due from 50 top wilful defaulters, including absconding diamantaire Mehul Choksi. RBI had revealed this information in reply to an RTI filed by Saket Gokhale. 
     
    However, at that time, everyone from the government, including the Union finance ministry and supporters of the government had told that technical write off does not mean waiving off loans and efforts are on for recovery of these written off loans. 
     
    In July this year, the All India Bank Employees Association (AIBEA) revealed names of top 2,426 wilful defaulters, who together owe over Rs1.47 lakh crore to banks. This the bank employees union did as part of its nationwide campaign to celebrate bank nationalisation day. As per the list, Mehul Choksi-owned Gitanjali Gems Ltd with its default of Rs4,644 crore to Punjab National Bank (PNB) tops the list. 
     
    It is followed by ABG Shipyard Ltd (Rs1,875 crore, State Bank of India-SBI), REI Agro Ltd (Rs1,745 crore, UCO Bank), Ruchi Soya Industries Ltd (Rs1,618 crore, SBI), Gili India Ltd (Rs1,447 core, PNB), Winsome Diamonds & Jewellery Ltd (Rs1,390 crore, Central Bank of India-CBI), Kudos Chemie Ltd (Rs1,301 crore, PNB), Nakshatra Brands Ltd (Rs1,109 crore, PNB), Coastal Projects Ltd (Rs984 crore, SBI) and Winsome Diamonds & Jewellery Ltd (Rs892 crore, PNB). These top-10 defaulters together owe Rs17,005 crore to State-run lenders.
     
    According to the list shared by AIBEA, among the 17 public sector lenders, SBI has highest number of wilful defaulters at 685 who, together, had defaulted on a loan of Rs43,887 crore. It is followed by PNB, which has 325 wilful defaulters with an outstanding of Rs22,370 crore. The data shared by the bank employees union, however has no information about wilful defaulters in Union Bank of India and IDBI Bank Ltd.
     
    The information obtained by Mr Velankar is just tip of the iceberg. And what is happening in three PSBs like SBI, BoB and BoM, proves that recovery of written off debt is just a whitewash undertaken by these lender to show a clean balance sheet and less NPAs. 
     
    State-run lenders continue to write off huge amounts of bad loans without any effort of recovery. All this happens because, as Mr Velaknar rightly pointed out, due to lack of checks and balances in banks by the regulator and concerned authorities.
     
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    COMMENTS

    virendra.3kushwaha

    3 months ago

    My loan

    rs235m

    3 months ago

    The foolish depositors are there to bear the burden of write off amount like a donkey. Rob the depositor to pay the coat suit thieves who run business . Capital at depositors money profit is mine loss passed on to depositors.

    debasis.samanta77

    3 months ago

    It's looted by top bank officials with Politician and Business,

    ps695080

    3 months ago

    Thanks to moneylife for making aware about these frauds ,
    I have started reading moneylife recently and completely unaware of white washing done by all PSB and i think most of the ordinary citizens of the country are unaware as no coverage given in any popular media.

    ssbh.dceo

    4 months ago

    NEXT YEAR BANKS WILL SHOW YOU "DEPOSITS WRITTEN OFF" AS IS FEARED BY THE NEW LAW ON DEPOSIT BAILOUT. INDIRECTLY THE DEPOSITORS MONEY IS LEGALLY SIPHONED OFF.
    YOU WILL WITNESS BORROWER SITTING IN A/C BUNGALOW AND THE POOR DEPOSITORS QUING UP FOR THEIR MONEY BEFORE A BRACH.

    ajeya

    4 months ago

    Privatizing PSU banks is the only way forward (or even closing down the banks if possible)No central government has shown the will to fix these banks, also looks like it is not even possible to fix. Just get rid of these banks. We may retain just SBI.
    However, depositors money is safe as RBI never let any banks to fail. You take out the support many banks will fail and there will be run on banks, economy collapses in days.

    kalemohan

    4 months ago

    Most of the money has already gone to the loan sanctioning authorities of the PSBs.
    Cairman of RBI must be penalised for this blunder.

    kalemohan

    4 months ago

    Well done shri Velankarji.Previously this gentleman has driven out Mr.Munhot chairman of the bank for mall practices.

    pprasad

    4 months ago

    Well done Mr Velankar.I am sure the banks spent more money to recover whatever pittance they claim to have recovered.That will be a separate subject.

    hamungel

    4 months ago

    Great Effort by Mr. Velankar.

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