ACB unearths loan fraud of over ₹177 cr in J&K Bank

The Anti Corruption Bureau, Jammu, on Friday formally booked the management, officers and officials of J&K Bank along with the beneficiaries of financial irregularities/loan fraud worth crores of rupees. The agency also conducted searches at various premises.

This came after a Joint Surprise Check (JSC) was conducted by ACB Jammu following allegations that J&K Bank officials had extended loans to the proprietors of a partnership firm Paradise Avenue during 2012-17 flouting the norms and, resultantly, the loan accounts turning non-performing assets (NPAs).

Surprise check

During the surprise check, the ACB found that the firm’s proprietors had approached J&K Bank’s New University Campus branch in Jammu for a loan of 74.27 crore to set up a residential complex, ‘Paradise Avenue’, at Narwal, Jammu, consisting of 52 flats in two towers.

The loan was sanctioned on January 30, 2012, with a pre-condition that the loan would be disbursed in phases, after securing a margin of 22.09 crore, including an unsecured loan of 2 crore, from the borrowers on pro-rata basis.

No titles

On scrutiny of the records of the branch, it surfaced that the loan amount was sanctioned by the bank in January 2012 with which the firm purchased 30 kanals of land (one kanal is one-eighth of an acre) with sale deeds registered in July 2012.

This meant that the firm had no titles to the land when the loan was sanctioned in January 2012.

It also came out that with the collusion of the bank officials, the consideration amount in the sale deed was shown to be paid through cheques with an inflated cost of the land.

Subsequently, the cheques were taken back and fresh cheques issued to the land owners from the loan account of Paradise Avenue and a loan account of Shree Simula Solutions, a firm of the leading partner of the firm.

Bank officials involved

Aware that the bank’s rules do not allow sanction of loans against purchase of land for a residential project, which is a commercial activity, the firm’s proprietors issued letters to the bank indicating that the land owners had supplied construction materials to the firm. But no material was, in fact, purchased by the firm from them.

Further scrutiny of the bank records revealed that though the bank was to release the loan amount in phases, by March 2014, it had disbursed the entire amount, in the first instalment itself.

The firm also took three more loans for 68.91 crore, 20 crore and 14.5 crore. totalling 177.68 crore in connivance with the bank management and officials.

The repayment of the loan was to start from September 2017 in quarterly instalments of 11.27 crore. However, the proprietors turned wilful defaulters, allegedly to get the loan account declared an NPA; indeed, on December 31, 2017, the loan account was declared an NPA by the bank.

The collusion between the bank management and the firm appears to have continued, with loans totalling 177.68 crore settled for 130 crore under the One Time Settlement (OTS) mechanism.

The bank management waived 50 crore on the principal amount, inflicting a substantial loss on the bank. Further, a a cheque for 40 crore, issued by the firm towards the OTS, bounced.

The ACB, Jammu, registered a case and conducted searches at the premises of individuals/companies connected with Paradise Avenue. It has seized incriminating material, documents, etc. Investigations are on. Email queries sent to J&K Bank remained unanswered.