Punjab National Bank's appeal in $ 45 million fraud claim brought in UK courts refused
The Court of Appeal in London has refused permission for the British subsidiary of Punjab National Bank (PNB) to appeal against a judgment dismissing its $45 million claim for fraud and misrepresentation in loans given to Indian and US renewable energy companies.
 
This was the third consecutive defeat for PNB in this case, with the English High Court having found that no fraud had been committed by the defendant borrowers against PNB and criticising the PNB's failure to disclose existing proceedings it had brought in the debt tribunal in Chennai, according to Zaiwalla & Co., a London-based law firm.
 
Sarosh Zaiwalla, Senior Partner of Zaiwalla & Co, the London law firm representing the defendants, said: "The case serves as a message to Banks that the English Courts will take a very dim view of a 'lack of candour' with the Court, if they are seeking an Order in the absence of the defendant and claiming that the English Courts are the correct place to deal with a claim."
 
Despite the fact that an English judgment is not necessarily recognised by courts in India or other countries, Indian banks frequently seek to commence proceedings in England to obtain a substantive judgment which it can then deploy in foreign jurisdictions.
 
PNB had claimed that it had been misled and defrauded by the actions of the defendants following the granting of loans amounting to $45 million to companies in the US and India controlled by the individual defendants.
 
The bank also alleged that money had been siphoned off and payments due had not been made under the loan facilities and guarantees. The defendants were associated with two groups of companies, Pesco Beam and Trishe Resources. Those and related companies borrowed sums from the PNB to fund, respectively, oil re-refining and wind farm projects in the US.
 
The law firm said that although the defendants were all based in India and the US, PNB asserted that on the basis of the loan facility agreements, the proper place for its claims was England. The court accordingly granted permission to the Bank to serve proceedings in India and the US.
 
However, unbeknown to the court, the Bank had already issued proceedings for the same debts in the Debt Tribunal in Chennai, and, with its syndicated partner Bank of Baroda, in the US. The revelation of the foreign proceedings proved to be the bank's undoing, it said in a statement.
 
The Bank has been ordered to pay 335,000 pounds towards the costs of eight defendants represented by Zaiwalla & Co.
 
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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    COMMENTS

    m.prabhu.shankar

    3 weeks ago

    What is going on ? People like me not able to believe these things. Why is PNB giving loans to companies for doing Oil refinery projects and Wind farm projects in US ? Whose money is this ? Our people - Middle Class and Poor people money.

    REPLY

    mukesh2903

    In Reply to m.prabhu.shankar 2 weeks ago

    We tax payers are in minority
    Why we do not have any representation?

    Ramesh Popat

    3 weeks ago

    can one believe that pnb was no.1 in 20 psu banks few years back!

    Supreme Court Says SARFAESI Act Applicable to Cooperative Banks: Report
    A five-judge Constitution bench of the Supreme Court (SC) on Tuesday held that cooperative banks across the country comes under the securitisation and reconstruction of financial assets and enforcement of security act (SARFAESI Act) and thus can initiate recovery proceedings against defaulters, says a report from Bar & Bench
     
    The judgment was delivered by a Constitution bench of justices Arun Mishra, Indira Banerjee, Vineet Saran, MR Shah and Aniruddha Bose.
     
    "The Bench held that co-operative banks are 'banks' for the purposes of section 2(1)(c) of the SARFAESI Act, and that the recovery procedure under section 13 of the Act is also applicable to such banks," the report says.
     
    SARFAESI act allows banks and other financial institution to auction residential or commercial properties of its defaulter to recover loans.
     
    The judgment also states that co-operative banks registered under state-specific acts and multi­-state level co­operative societies registered under the Multi­-state Co­operative Societies Act, concerning 'banking' are governed by the legislation relatable to entry 45 of list I of the 7th schedule.
     
    The argument that the 2013 amendment to the SARFAESI Act adding multi-state cooperative banks to Section 2(1)(c)(iva) was a 'colourable exercise of power' and thus was dismissed by the Bench, the news report says.
     
    Bar & Bench report says, "The five-judge Bench has also unanimously held that co-operative banks involved in banking activities are covered u/s 5(c) & 56(a) of the Banking Regulation Act, 1949 which is a legislation relatable to Entry 45 of List I. Thus, the Court has held that cooperative banks cannot carry on any activity without compliance of provisions of the 1949 Act and any other legislation applicable to such banks and the Reserve Bank of India (RBI) Act."
     
    The Court in effect also upheld the 2003 notification issued under the Banking Regulation Act, by which co­operative banks were brought within the class of banks entitled to seek recourse to the provisions of the SARFAESI Act, it added.
     
    The SARFAESI Act was introduced in 2002, which defined bank and multi-state co-operative banks. By a union government notification passed in 2003, cooperative banks were allowed to proceed under the SARFAESI Act.
     
    However, in 2007, while hearing a case, a three-judge bench of the Supreme Court held that cooperative banks established under the Maharashtra Cooperative Societies Act, the Andhra Pradesh co-operative societies act and the Multi-state Cooperative Societies Act, transacting the business of banking, do not fall within the meaning of 'banking company' as defined in Section 5(c) of the Banking Regulation Act.
     
    The three-judge Bench in that case also held that the provisions of the recovery of debts due to banks and financial institutions act by invoking the doctrine of incorporation, are not applicable for recovery of dues by the cooperatives from their members.
     
    However, in view of several conflicting decisions on the issue, a three-judge bench referred the matter to a larger bench.
     
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    RBI Cancels Banking License of CKP Cooperative Bank
    The Reserve Bank of India has cancelled the banking licence of CKP Cooperative Bank, as its financial position has become unsustainable.
     
    Accordingly, RBI took the decision on April 28 which came into effect at the close of business hours on Thursday.
     
    "The Registrar of Co-operative Societies, Pune, Maharashtra, has also been requested to issue an order for winding up the affairs of The CKP Co- operative Bank Ltd., Mumbai and appoint a liquidator for the bank," RBI said in a statement on Saturday.
     
    As per the statement, the financial position of the bank is 'highly adverse and unsustainable'.
     
    "There is no concrete revival plan or proposal for merger with another bank. Credible commitment towards revival from the management is not visible," the statement said.
     
    "The bank is not satisfying the requirement of minimum capital and reserves... and capital adequacy and earning prospects as stipulated in Section 22(3)(d) of the Act and also stipulated minimum regulatory capital requirement of 9%."
     
    According to RBI, the Bank is not in a position to pay its present and future depositors.
     
    "The affairs of the bank were and are being conducted in a manner detrimental to the public interest and interest of the depositors and that the general character of the management of the bank is prejudicial to the interest of depositors as also public interest," the statement said.
     
    "The bank's efforts for revival have been far from adequate though the Bank has been given ample time and opportunity and dispensations. No merger proposal has been received in respect of the bank. Thus, in all lik elihood, public interest would be adversely affected if the bank were allowed to carry on its business any further."
     
    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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    COMMENTS

    rajoluramam

    3 weeks ago

    In supervision of cooperative banks by RBI and Registrar of cooperative societies, lot is lacking. Politicians play a major role in the affairs of the cooperative banks. The first was punjab Maharashtra, and now the second is CKPBank. In future many more will follow. The worst loosers are the rural folk due to this failure of cooperative banks.

    REPLY

    shirish.s

    In Reply to rajoluramam 3 weeks ago

    I fully agree with your view.
    In this process, a common citizen who have kept their life time savings in such banks, are the moist sufferers.

    shirish.s

    3 weeks ago

    Why RBI is not vigilant in Bank's yearly audit and its loan's receivable, on year to year basis?
    This will stop all the banks to go into liquidation and save depositor's hard earned money kept in bank's fixed deposits.

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