Relief for MBS Jewellers as Telangana High Court Halts IOB Fraud Declaration Process
Telangana High Court halts IOB’s move to label MBS Jewellers’ loan account as fraud, citing lack of fair hearing
Hyderabad: In a relief to MBS Jewellers Private Ltd, the Telangana High Court issued interim suspension orders on the showcause notice issued by Indian Overseas Bank (IOB) to declare the company’s loan account as fraud.
The bank had proposed action on the ground that the company had mortgaged a property at Hafeezpet of one of its affiliated companies regarding which a dispute is pending before the Supreme Court.
The allegations made by the bank were that the borrower or defaulter company had misutilised the bank guarantee facility and CC facility. Guarantees given during 2011-12 worth `70 crores were invoked by MMTC.
Around 48 acres of urban land property at Hafeezpet in Hyderabad, which was mortgaged by Keerti Anurag Investments Pvt. Limited, is in dispute. The borrower suppressed the pending SLP before the Supreme Court and induced the bank to part with huge public money without disclosing the encumbrance.
MBS Jewellers had availed cash credit (CC) limits, letter of guarantee (LG) and demand loans in gold with interchangeability of CC and LG limits from the IOB in 2008. The company defaulted, and its loan account was classified as non-performing asset in 2013. Proceedings under the Sarfaesi Act and the RDDBFI Act were initiated and the issue is pending before the Debt Recovery Tribunal.
The bank assigned the debt of the company to Raytheon Asset Reconstruction Company.
Senior counsel L. Ravichander and counsel Pogulakonda Pratap, representing MBS Jewellers, said the notice had been issued after seven years and 10 months, for review of the fraud declaration of the loan account.
P. Pratap argued that the Supreme Court had said that the rule of ‘audi alteram partem (hear the other side)’, had to be read into the master directions on frauds. But, the bank issued the notice without hearing their client.
Justice Surepalli Nanda, considering the Supreme Court guidelines, issued interim suspension orders of the bank’s showcause notices.
