In a surprise decision, the Supreme Court last week said criminal charges in the bank fraud case involving Sterling Biotech would be dropped against the company’s promoters Nitin and Chetan Sandesara in return for the payment of ₹5,100 crore by December 17. The brothers had fled India in 2017 on Albanian passports.
“The judgment is being examined to look at its wider ramifications and if there is a need to take measures to mitigate any negative impact it may have on such bank fraud cases,” an official told ET.
The initial review is being conducted internally by the finance ministry.
Any call on filing a review petition will be taken after a thorough examination, seeking legal opinion and discussions with all agencies involved.
Designated fugitivesThe promoters figure among 14 designated fugitive economic offenders. Others in this category are Vijay Mallya, founder of the now-defunct Kingfisher Airlines, and diamond magnate Nirav Modi, both of whom deny accusations of bank fraud.In its ruling, the apex court said the decision could not be used as precedent, but there is concern that other offenders could similarly offer to repay money, creating a quandary for the government.
Mallya has, in the past, offered to repay all loans.
A senior bank executive said this might pose a problem in recovery cases where promoters have been tagged as fraudsters.
“Already, as per Reserve Bank of India guidelines, we have to issue a detailed show-cause notice and now promoters during this stage itself may want settlement, citing this case,” he added.
Bankruptcy law worries
Another bank executive said the judgment could dilute the relevance of bankruptcy code laws.
“If only settlement is the final solution, then why go through that rigorous process? The Insolvency and Bankruptcy Code (IBC) was meant as a deterrent, that the promoter can lose control and his social standing. This judgment negates that objective.”
According to senior Supreme Court advocate Abhimanyu Bhandari, loan recoveries should be a civil matter and not pursued by investigative agencies.
“While questions will be raised about whether it should be so easy for a defaulter to just walk in months later and have the cases quashed by paying the default amount, such cases should not be instituted in the first place,” he said.
The CBI had registered an FIR in the Sterling Biotech case on August 30, 2017, in which it also booked three income-tax commissioners.
