ACB files FIR in J&K Bank loan fraud case

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The Anti Corruption Bureau (ACB) of Jammu and Kashmir on Saturday registered an FIR in the J&K Bank loan fraud case of Rs 1,100 crore advanced to Rice Exports India (REI) Agro Ltd. Searches have been conducted at many locations in Delhi, Jammu and Srinagar.

The ACB registered a Preliminary Enquiry (PE) into the allegations "that the officers/officials of the J&K Bank branch in Mahim, Mumbai, and Ansal Plaza, New Delhi, had sanctioned loans to the tune of Rs 800 crore in favour of a firm namely REI Agro Ltd on fake documents and in violation of the laid down banking procedure between 2011 and 2013 which resulted in the accounts becoming NPA in 2014, thereby causing a huge financial loss to the bank."

It emerged during the PE that REI Agro, which has shown its head office in Kolkata and corporate office in New Delhi, approached the J&K Bank's Mahim branch without having any office in Mumbai and got the loans/advances sanctioned in their favour worth Rs 550 crore. The Vasant Vihar Branch of J&K Bank also sanctioned Rs 139 crore in their favour against the supplier bill discounting facility and takeovers.

The company approached the J&K Bank's branches in Mahim and Vasant Vihar for the sanctioning of the above mentioned advances for making payment to the farmers as per terms and conditions laid down in the loan sanction order of J&K Bank.

The farmers were supposed to provide paddy to the company, in turn the company had to sell the produce (paddy) and the remittance thereof had to be deposited in the bank as installments against the advances received by the company.

It was known to the bank authorities and the company that the loan amount had to be disbursed among the farmers for production of paddy, which was brazenly violated by the company in connivance with the bank authority who allowed disbursement of loan through Joint Liability Group (JLG) though the company had already received the paddy and were not entitled to disburse the loan under such circumstance.

As per the probe conducted during the PE, the JLG were in fact non existing entities whose credentials and antecedents had never been verified by the bank. The objective was to facilitate the company to divert the loan amount for its own benefit.

The bank also violated NABARD guidelines where members of JLG (which is a group of farmers) should be from the same area/village, but this aspect was deliberately and with malafide intentions ignored by the bank officials.

In fact, the crop loan had been recommended against the securities of hypothecation of receivables of farmers/JLG for supply of paddy to REI Agro and corporate guarantee of the company along with postdated cheques (PDCs), which cannot be construed as a tangible security.

Further, the bank officials also failed to take cognizance of the disbursement requests of the company wherein the firm itself mentions that it had already received the produce from the farmers/JLG thus making the loan unwarranted. On scrutiny of bank records, there is nothing on record as to who drafted the loan documents and even there is no vetting certificate of the concerned law department.

As per records of the J&K Bank, its Vasant Vihar branch had in fact taken over the loan obtained by the company from IDFC and IREDA. This account too turned into NPA along with other accounts. The machines were sold by the bank and Rs 54 crore was recovered from the company, but there is still an outstanding of Rs 85 crore.

These loans/advances were sanctioned/disbursed by the officials of J&K Bank's branches in Mahim Vasant Vihar in connivance with and under the patronage of then Chairman of J&K Bank, Mushtaq Ahmad Sheikh under single conspiracy spread over several years, in a planned and pre-designed manner by misuse and abuse of their authority as public servants of the bank, just to serve the interest of the promoters of REI Agro.

Sanjay Jhunjhunwala, Chairman of REI Agro, and Sandeep Jhunjhunwala, Vice President and Managing Director of the company, allegedly misused and abused of their authorities as public servants of the bank to confer huge monetary benefit upon the company dishonestly and fraudulently, which resultantly inflicted huge loss of Rs 635 crore plus Rs 489.45 crore (interest component), totalling to Rs 1,124.45 crore to the J&K Bank which ultimately is a loss to the state exchequer.

The omissions and commissions which have surfaced during the PE clearly disclosed commission of offences U/S 5 (1) (d) r/w 5 (2) J&K PC Act Svt 2006 and Sections 467, 468, 471 and 120-B of RPC on the part of several bank officials, including Mushtaq Ahmad Sheikh, then Chairman of J&K Bank, Imtiaz Ahmed Bhat, then Vasant Vihar branch head, Adil Bashir, then branch head at Mahim branch, and the beneficiaries (as conspirators) namely Sanjay Jhunjhunwala, Sandeep Jhunjhunwala, Danish Beig, Vice President, Corporate Finance, REI Agro, and Rahul Singhania, Manager, Corporate Finance, REI Agro, among others.

Soon after the registration of the FIR, ACB teams carried out extensive searches at the houses of the aforesaid accused J&K Bank officials at nine locations in Kashmir Valley, four locations in Jammu and three locations in the National Capital Region, including the houses of Sanjay Jhunjhunwala and Sandeep Jhunjhunwala.

Further investigation in the matter is underway and three teams are continuing the investigation/searches in the National Capital Region.

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