Sickness of the Banking industry – Written Petition

IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (CRL.) NO.________OF 2018
(D)No. 6925/2018
BETWEEN
MATHEWS J.NEDUMPARA AND ORS. …..Petitioners
VERSUS
THE UNION OF INDIA & ORS. …Respondents
P A P E R – B O O K[FOR INDEX KINDLY SEE INSIDE] ADVOCATES FOR THE PETITIONERS:RABIN MAJUMDER
SYNOPSIS AND LIST OF DATES
The reason for sickness of the Banking industry was nothing but the
sickness of the economy. If the economy is on the right path, namely, the
manufacturing, service, trade and commerce Industries, the Banks will face no
difficulty in recovering the amount lent.
The Banking industry in this country is in dire straits. No amount of window
dressing can conceal it for long. The pertinent question is, how could have the Banks
invested thousands of crores in ventures, owned by the Anil Ambanis, Mallyas,
Bhushans and the like without there in existence adequate securities to cover the
credit facilities so extended? It is not too difficult to find the answer to the question. The
corruption and malpractices which plague the Indian Banking system is the reason.
There is no real accountability. At the end of the day, when the Bank is badly
bleeding, nobody is made responsible. There are many reasons why the system of
checks and balances have failed miserably. And it will continue to fail, even worse, in
the not so far future.
And it is done with the knowledge of everyone in the system which ensures
the checks and balances. The fraud as above is no matter in isolation. It is almost the
rule. And it is really horrifying. The only way the rampant corruption could be dealt with
is to bring about greater transparency and reforms. The Banking industry cannot be a
cloistered virtue. What is therefore imperative is to put into existence a mechanism
which could diversely investigate banking frauds. Such a body shall consist experts of
banking, auditing and investigations so too of the small entrepreneurs, traders and
farmers.
Hence the instant Writ Petition (Criminal) for Writ in the nature of
Mandamus and other remedies.
THE LIST OF DATES
January, 2013 When banks told the RBI that it was becoming difficult to eliminate
or reconcile the burgeoning Nostro accounts, the central bank
specifically advised that public sector banks should minimize the
number of Nostro accounts to have a better control over
reconciliation.A nostro account is an account that a bank holds in a
foreign currency in another bank.It appears the banks did have a
clear idea of the risk way back in 2013 when they went to RBI with
the problem.;
Another compliance failure that facilitated the Rs 11,000 crore
scam was the unmonitored usage of the SWIFT financial
messaging system. In this too, it is found a cautionary tale from
two years ago, when the Union Bank of India was hacked and lost
(though later recovered) $171 million. Most importantly, just like
the Nirav Modi scandal, fraudulent payment instructions went out
over SWIFT, bypassing the core banking system;
September, 2016 RBI deputy governor S.S. Mundra gave a speech, in which he
addressed this issue, thus: “Recently, in India too, a similar
attempt was made on a commercial bank by generating fraudulent
payment instructions on the Nostro accounts and transmitting
them over SWIFT messaging system. Though monetary loss could
be prevented with proactive follow-up with the concerned
paying/intermediary banks, the incident has reinforced the fact that
the various stakeholders have not learnt the lessons yet”;
29/01/2018 A PNB official from Mumbai filed a criminal complaint with Central
Bureau of Investigation (CBI) against 3 companies, Solar Exports,
Stellar Diamonds and Diamond R US, and four people, including
diamantaire Nirav Modi and Mehul Choksi, the managing director
of Gitanjali Gems, saying they had defrauded the bank and caused
a loss of Rs. 280 crore ($43.8 million). The bank alleged two junior
employees at the Mumbai branch had helped the companies and
people managing them get “letters of undertaking” (LoUs) from it
without having a sanctioned credit limit or maintaining funds “of
margin”;
14/02/2018 PNB said that it had discovered fraudulent and unauthorised
transactions totaling Rs. 11,300 crore at the Mumbai branch.
Investigators have said the latest disclosure was related to the
earlier case filed;
15/02/2018 Axis Bank said that it had dealt in transactions that had been
guaranteed with letters of undertaking from Punjab National Bank,
but it had since sold those transactions;
16/02/2018 Raids were carried out by the Central Bureau of Investigation
(CBI) on the offices of jewellery retailer Gitanjali, whose chief
executive has been accused along with Nirav Modi of colluding
with PNB employees to fraudulently obtain advances for payments
to overseas suppliers;
17/02/2018 State-run UCO Bank said it has an outstanding exposure of about
$411.82 million in the $1.8 billion fraud detected in public sector
Punjab National Bank (PNB) and that it was confident of receiving
the payment. The Income Tax department warned in an internal
note seen by media that domestic banks could take a hit of more
than $3 billion from loans and corporate guarantees provided to
Nirav Modi and Mehul Choksi. A tax department spokeswoman
told media that officials had seized 29 properties and 105 bank
accounts linked to Nirav Modi.
21/02/2018 Instant Writ Petition filed.
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
WRIT PETITION (Crl.) NO. ________OF 2018
(D)No. 6925/2018
BETWEEN
1. Mathews J.Nedumpara,. …PETITIONER NO.1
2. A.C.Philip, …PETITIONER NO.2
3. Mrs.Rohini M Amin …. PETITIONER No.3
4. C.J.Joveson, …. PETITIONER No.4
5. AnjanSinha, …. PETITIONER No.5
6. Amrit Pal Singh …. PETITIONER No.6
Versus
1. The Union of India,
Represented by its Secretary in
the Department of Banking, ………RESPONDENT NO.1
2. The Central Bureau of Investigation,
Represented By it Director, ……RESPONDENT NO.2
3. Enforcement Directorate,
Represented by it’s Director, … RESPONDENT No. 3
4. CENTRAL VIGILANCE COMMISSION
Represented by Central Vigilance Commissioner, … RESPONDENT No. 4
5. Reserve Bank of India,
Represented by it’s Governor, … RESPONDENT No. 5
6. Indian Banks’ Association
Represented by it’s Chairman … RESPONDENT No. 6
7. Principal Chief Commissioner Of Income Tax , Mumbai region ………RESPONDENT NO.7
8. Institute of Chartered Accountant of India(ICAI),
Represented by it’s Chairman, … RESPONDENT No. 8
9. Board of Directors of Punjab National Bank,
Represented by its Chairman &MD … RESPONDENT No. 9
10. Chairman and Managing Director of
UCO Bank, ………RESPONDENT NO.10
11. Shri.Nirav Modi, … RESPONDENT No. 11
12. Shri.Mehul C. Choksi,
Director of Gitanjali Diamonds, … RESPONDENT No. 12
13. Shri.VijayMallya, … RESPONDENT No. 13
14. Winsome Textile Industries Ltd., ………RESPONDENT NO.14
15. Rotomac Global Pvt. Ltd., ………RESPONDENT NO.15
16. Solar Exports, ………RESPONDENT NO.16
17. Stellar Diamonds Plc, ………RESPONDENT NO.17
18. Fine Diamonds R Us ………RESPONDENT NO.18
19. Gitanjali Gems ………RESPONDENT NO.19
20. Bhushan Steel Limited, ………RESPONDENT NO.20
PETITION UNDER ARTICLE 32 OF THE CONSTITUTION OF INDIA SEEKING
DECLARATION AND OTHER RELIEFS.
TO
THE HON’BLE CHIEF JUSTICE AND
HIS COMPANION JUSTICES OF THE
HON’BLE SUPREME COURT OF INDIA
THE HUMBLE PETITION OF THE PETITIONER ABOVE NAMED
MOST RESPECTFULLY SHEWETH
1. The Petitioners are citizens of India. They institute the instant writ petition for the
enforcement of their fundamental rights, nay, to seek remedies in the nature of
mandamus as guaranteed under article 32 of the constitution of India. The first
petitioner is a lawyer enrolled in the year 1984 and has been in practice since then in
different courts and Tribunals in the different parts of the country and primarily in
Bombay. He has been mainly practicing in the realm of Banking and therefore has a
fair idea of the challenges, nay, the great crisis the Banking industry of the country is
facing, so too the constituents, nay, the small time traders and entrepreneurs who
seek credit facilities from the Banks and Financial Institutions. The petitioners 2 to 6
too are equally concerned of the crisis the Banking industry is facing today. As tax
payers and citizens, the fundamental rights of the petitioners are put to great
jeopardy by the rampant corruption and inefficiency and the total breakdown of the
regulatory mechanism as evidenced by the ‘Nirav Modi’ and ‘Mallya’ scams to name
a few, involving astronomical figures.
2. The legal status and the imperative reason for which the respondents above are
arraigned so is manifest from the very cause title itself. The Union of India is a
necessary party since the relief sought for cannot be granted in it’s absence. The first
respondent therefore, is a proper and necessary party to the instant WP. The
Respondents 2-8 are necessary parties since the instant WP is all about regulatory
mechanisms in the Banking Sector. Respondents 9-20 are proper parties since the
just and fair adjudication of the instant WP their presence is imperative. Further it is
elaborated infra in the course of the narration of the statement at the appropriate
stage.
3. This writ petition certainly involves great amount of public interest. But it is not the so
called PIL. PIL, which the great legendary jurist, late Justice V.R.Krishna Iyer, Chief
Justices P.N. Bhagavati and Y.V. Chandrachud envisaged, are pro bono litigations to
open the doors of this court and HCs to the poor and the illiterate who could not have
invoked the jurisdiction of the court under Article 32 and of the High Courts under
Article 226, because of their poverty, illiteracy and like reasons. Here, the petitioners
are not seeking any relaxation of their locus standi. The remedy of ‘mandamus’ is a
public law remedy the chartered High Courts of Bombay, Calcutta and Madras
always granted, where sufficient grounds existed; like the writs of Habeas Corpus,
Certiorari, Quo Warranto and Prohibition. By Article 226 the power to grant high
prerogative writs were extended to all the High Courts and by Article 32 to this court
as well. The petitioners therefore cannot be expected to plead that this instant writ
petition is a PIL, which it is not.
4. Prior to nationalization of the 14 Major Banks in the year 1969, the Banking industry
in this country was entirely in the province of joint stock companies under the
management of prominent business families. The only exception was the State Bank
of India, nay, the Imperial Bank of India being it’s original name. The State Bank of
India was distinct from other Banks in the sense that it was a creation of an Act of
Parliament.
5. Prior to the independence, there were hardly any legislations to regulate and control
the Banking business in the country except the Reserve Bank of India Act. However
in the year 1949, the Banking Regulation Act,1949 was enacted, which meant the
investiture of certain regulatory powers in the Reserve Bank of India, as also in
Government of India. The nationalization of the 14 major Commercial Banks in the
year 1969 meant the Banking industry being literally brought under the control of the
Government of India. The Banks’ nationalisation, though was professed to make the
Banks accessible to the common man, particularly to the agriculturists and artisans
and to bring them out of the clutches of the money lenders who charge exorbitant
interest and to promote the healthy growth of the Banking industry, far from
achieving the noble objectives, as above, did not serve any of the said purposes. On
the contrary, it reduced commercial Banks into another department of Government.
Red tapism, corruption and political influence in the decision making of Banking
institutions meant the foundations of the great institutions, which the said 14
commercial Banks once were, eroded.
6. The economic liberalization under the late Shri. P.V.Narasimha Rao and Shri.
Manmohan Singh as his finance minister meant a new era of hope. Except that, a
few private sector Banks like the ICICI Bank could secure exponential growth, and
with the entry of a few Foreign Banks there was not much of a healthy revolutionary
change.
7. With the Bank nationalization, the Government of India ,and at it’s behest the RBI,
interfered in the affairs of the Commercial Banking, particularly in the realm of
fixation of interest rates and sanctioning of loans, the Banking institutions were
reduced to a Government department. 8. The commercial Banks ceased to function on commercial considerations. The Chief
Executive Officers of the Banks were appointed often compromising merits, and on
political and other considerations. The economic liberalization had very little real
impact. Recovery of Bad Debts became the greatest of concern. The government
appointed Chairman and managing directors and other senior functionaries of the
state owned Banks which suffered huge losses on account of bad debts which
sought to conceal the reality by not providing adequately for bad and doubtful debts.
This issue being brought to the public domain, in the nineties, the RBI introduced the
concept of compulsory classification of Accounts as NPA. The RBI also introduced
various schemes for one time settlement, namely, OTS for resolution of long pending
litigations and bad debts.
9. The one single major step which the NDA Govt. led by Shri. Atal Bihari Vajpayee
could take credit of is the reduction in the interest rates and flexibility in the fixing of
interest rates. The nationalization of the Commercial Banks by the then Prime
Minister Indira Gandhi was one single reason which resulted in the crippling of the
economic growth of the country. The “license Raj” coupled with bank nationalisation
and exorbitant rate of Taxes and in particular income tax, at one point of time, at the
rate of 95% crippled the Indian industry and commerce. India’s Contribution in the
international trade remained less than 1%. There was great foreign exchange
shortage. At the time when late Prime Minister Shri. P.V N Rao embarked upon the
path of liberalization of the Indian economy, the Banks were offering 20% interest on
Non Resident Accounts. The cost of acquisition funds for our banks was the highest
in the world at a ridiculous rate of 20% for NRNR accounts (Non-resident Non- Repatriable Term Deposit Account). The Vajpayee Government by reducing interest
rates gave a new life to commerce and industry. However, the fruits of such
benevolent measures were largely defeated by the tyrannical and unjust laws which
the Vajpayee government enforced to recover the debts, namely the SARFAESI
Act,2002. The petitioners beg to dwell into the same at some length infra.
10. The reason for sickness of the Banking industry was nothing but the sickness of the
economy. If the economy is on the right path, namely, the manufacturing, service,
trade, commerce and industry, the Banks will face no difficulty in recovering the
amount lent. On the contrary where when the economy is on the slowdown recovery
of monies lent becomes difficult.
11. The Banking industry of this country today is in dire straits. No amount of window
dressing can conceal it for long. The total NPA as on date is about 10 Lakh crores. Out of which the contribution of debtors who owe less than 100 crore is just about
17%. The lion share of the NPA constitute to be Iron and Steel, Aluminum, Power,
Infrastructure, Real Estate, Construction, Aviation and the like which involve
thousands of crores of rupees. The SARFAESI Act is a toothless tiger insofar as
recovery of the huge amounts of facilities the Banks had extended to the aforesaid
giants, in as much the value of the securities in most cases is just 20 to 30 percent of
the credit facilities granted. The pertinent question is: how could have the Banks lent
thousands of crores in ventures, owned by the Anil Ambani’s, Vijay Mallays, Essar,
Ruias, J.P Group, Bhushans, Nirav Modis and the like without there in existence
adequate securities to cover the credit facilities so extended? It is not too difficult to
find the answer to the question. The corruption and malpractices which plague the
Indian Banking system is the reason. Nothing else. The Petitioners beg to dwell in
to the same a little further infra.
12. The granting of loans and credit facilities involve multiple levels of decision making
and elaborate procedure, nay, all intended to safeguard the interest of the Banks.
But that exists only on paper. There is no real accountability. At the end of the day,
when the Bank is badly bled nobody is made responsible. There are many reasons
why the systems of checks and balances have failed, miserably. And it will continue
to fail, even worse, in the not so far future.
13. The funding of profits initiated based on project reports and projections made by the
Chartered Accountants and Merchant Bankers. The Petitioners beg to submit,
though with a great amount of hesitation, that the failure on the part of the Chartered
Accountants and Merchant Bankers to live up to the highest standards of
professionalism, competence and ethics is the single most factor for the crisis of
such a monumental dimension the banking industry of this country facing today.
They charge their clients, namely, the Borrowers heavily and give projects reports
painting very rosy pictures. The lender bank, nay, often the consortium of Banks, where huge amount of loan is granted, approve the projects and sanction the loans
based on the report of the Chartered Accountants and Merchant bankers. Often, whether the loan is sanctioned and if so, the extent, all will depend on lobbying.
There are large numbers of brokers who style themselves as consultants. The
majority of them are ex-Bankers. They are the true wheeler dealers. They have
access to the Management of the Banks at various levels and they grease the
machinery, the banking hierarchy by resorting to most inappropriate means. And
facilities running into thousands of crores are released. Gratification, that is the
lubricant.
14. The approved valuers of the bank play not so insignificant role in defrauding the
Banks and financial institutions. The Petitioners are not painting all ‘valuers’ or
Chartered Accountants and ‘Merchant Bankers’ in the black. However, the
Petitioners 1 to 6 as practitioners of Banking Laws, particularly SARFAESI Act, could
come across many instances where properties are overvalued in astronomical terms
and credit facilities granted based on such fraudulent valuation. Sometimes the
secured assets are valued even more than 10times of it’s actual value. And it is done
with the knowledge of everyone in the system who are duty bound to act as the
“check and balance” which ensure the checks and balances. The fraud as above is
no matter of being in isolation. It is almost the rule. And it is really horrifying.
15. The SARFAESI Act while it leaves the scamsters and fraudulent men scot free, mercilessly liquidate the honest and the upright men and women who had availed of
the credit facility from Banks since they were short of funds and had all the good
intentions to repay, but for circumstance beyond their control or even anticipation
could not repay on time. The Petitioners 1to6 as Banking lawyers had come across
many such heartbreaking scenarios where smalltime entrepreneurs, often first
generation, having availed of a loan from a banking institution being forcibly thrown
out of his home and that too by virtue of an order of a Magistrate under S.14 of the
SARFAESI Act, which was rendered behind his back.
16. The greatest victim of the SARFAESI Act is the honest businessman or entrepreneur
who had no intention to defraud the Bank and in the honest belief that he would
certainly be able to repay the loan and have mortgaged his properties, often his very
home itself, which is worth many times more than the amount of the loan taken. For
eg. where an entrepreneur who had availed of a loan of rupees one crore and
mortgaged properties worth ten crores but is not in a position to easily liquidate the
asset and raise the money to repay the bank, the Banks would go most aggressively.
Because the value of the property mortgaged is far in excess of the debt and offer
no difficulty in recovering. They would afford no opportunity for resolution of the
debt, nay, even restructuring, but would mercilessly invoke SARFAESI Act, take
forcible possession of the security and often the very residential home of the hapless
borrower and sell at a price far below the market value. The Petitioners have seen
from close quarters cases where a poor borrower is dispossessed of his home and
got it sold in so called auction after grossly undervaluing it. The difference between
the actual price and the actual price for which it was sold and the distress/ auction
price for which it was sold on record are shared by the officers of the bank, the
intermediaries and the so called auction purchaser. The auction purchaser too gets a
share because he is able to buy the property at the reserved price which is grossly
undervalued or slightly above it. The SARFAESI Act, has led to the large-scale
corruption in the banking industry, the Petitioners are afraid to say.
17. The system of checks and balances in the Banking system are in operation only on
paper. The auditors are primarily to be held responsible for that. There are five
kinds of audit by five different entities; namely:
a) Internal-audit by the Banks own audit staff or by Chartered Accountants hired by
the Bank
b) RBI’s audit by the RBI’s own Audit staff
c) Statutory Audit-by practicing Chartered Accountants subject to the discipline and
control of the Institute of Chartered Accountants of India.
d) C&AG Audit: by the Audit Staff of Comptroller &Auditor General of India.
Satyam scam was an eye opener for all concerned and in particular for Institute of
Chartered Accountants of India (ICAI). But they learned nothing from Satyam
scam where the Statutory Auditors had connived with the Ramlinga Raju, _to
defraud the nation. Mallya’s case is yet another instance where all the four
auditors aforesaid, who were to act as the sentinels qui vivihad failed to discharge
their duty. The current Nirav Modi scam is only a tip of the proverbial ice berg. It is
the result of the gross and manifest failure of our institutions. The greatest
challenge the country facing today is the moral decay. Corruption is manifest in all
walks of life. It has become the part of our very way of life itself, frightening
though.
18. The only way the rampant corruption could be dealt with is to bring about greater
transparency and reform in banking. The Banking industry cannot be a cloistered
virtue. All loans extended exceeding Rs.100 crore has to be subjected to independent
scrutiny and where the securities given as mortgage is less than the amount of loan
outstanding is required to be directed to be sufficiently covered, if need be by
legislation. All such big accounts ought be subjected to forensic audit by external
agencies.
19. The banking frauds, so far as the Petitioners could gather from their experience as
practitioners in the banking realm, is hardly a guarded secret. When fraud as the Nirav
Modi or Mallya takes place, many in the banking system would have well sensed the
foul play but they don’t dare to expose it for fear of dire consequences. What is
therefore imperative is to put into existence a mechanism which could independently
and effectively investigate banking frauds. Such a body shall consist of experts of
banking, auditing, investigations so too representing the common man, the real stake
holder. The CBI should more focus on Banking frauds as it’s utmost priority and shall
establish special departments to deal with exclusively of Banking frauds for the
existing divisions are proved to be far from able to cope up to the requirement of the
day.
20. The major problem the Banking Industry in India facing today is the phenomenal
frauds. The fraud which Vijay Mallaya and Nirav Modi and his ilk could perpetuate
because Banks advanced funds without adequate security or securities are grossly
overvalued. These frauds are not committed by one or two employees in the lower
ranks. But are perpetuated by the higher ups so too because of the total failure of the
audit system. The fraud committed by Nirav Modi could be compared to a ‘Ponzi
scheme’. The rolling over, as happened in Nirav Modi case was possible only because
the LOU’s were issued without any collateral to secure the contingent liabilities.
Because no reconciliation of the SWIFT Messages was made with Core Banking
System. There was no audit of the SWIFT Messages. The RBI’s auditors failed to audit
the SWIFT Trail while the PNB Booked the huge amounts which it received as fees
towards the LOUs granted by it. The Petitioners are made to understand that, these
sort of frauds are not that uncommon at all, though may not be of the great proportion
as in the instant case.
21.While the Malyas and Nirav Modi’s are allowed to plunder the Public Sector Banks,
namely, while they are granted Credit facilities worth thousands of crores without any
collateral security, the small traders and small entrepreneurs are made to mortgage his
very home or the gala or office to secure a small amount. While the big sharks- the
Anil Ambani Group, Winsome Textile, Essar Steel, Bhushan Steel, et al. default
thousands of crores of Rupees, the Banks instead of taking recourse to drastic steps
to recover the amounts due under the SARFAESI Act, extended them further credit
facilities under the various debt restructuring or resolution schemes. The small fish is
dispossessed of his very home, his office, his shop or factory under the draconian
SARFAESI Act. This is unjust. However, it has not received the attention of the
Government, though it ought to have long before. The small fish, the small trader,
artisan, small scale industries where the loan is less than 5 crores has to be excluded
from the purview of the SARFAESI Act. So too a simple residential unit, the very home
of the small borrower has to be excluded from the provisions of the Act. What is done
in the name of SARFAESI Act rendering a small entrepreneur or small trader
homeless because he could not service the account for 3 months is unjust and
inhuman. It is barbaric.
22. The SARFASI Act is toothless in so far as the big fish is concerned. The RBI has been
issuing various schemes for one time settlement or for restructuring or restoration of
the debts from time to time. But nothing is wrong if it is done where it is justified.
However, where restructuring or restoration is justified in the case of a genuine
business loss or failure due to reasons beyond the control and anticipation of the
Promoter, the Banks often decline it. Because the securities are in far in excess of the
amount due and therefore by invoking the SARFASI Act, the debt could be recovered
without any difficulty. However, where the debt is not adequately covered by collateral
securities, nay, where the value of the securities are for less than that of the amount
due, the Banks won’t invoke the SARFAESI Act. Because in that case no window
dressing is possible and the Banks will have to make the requisite precaution for bad
and doubtful debts. Therefore it is not profitable to do so for the Bank ought to show
the losses in its profit and loss account. Therefore, where the assets are grossly
overvalued and the collateral are bogus, the banks often restructure the account and
even pumping further funds and conceal the true state of affairs from the public at
large. This menace has to be put to an end. The law will have to expressly state that
no Bank can advance money unless the loans are adequately covered by collateral
securities, where it is in excess of say 10 crores. The law shall also provide for
mechanism to deal with an iron fist the grossly over valuation of the collateral
securities. There ought to be a watch dog to oversee the functioning of the Chartered
Accountants since the ICAI has failed to discharge its duty as a regulator of the
Statutory Auditors. In the like manner, there ought to be an effective mechanism to
regulate the functioning of the “approved valuers” so too of the Merchant Bankers who
are marketing the projects among various banks and financial institutions at the behest
of the promoter.
23. The law should while punishing the dishonest and fraudulent, it should not be tool of
harassment of the innocent. The SARFAESI Act and even the Insolvency Code while
protecting the dishonest and the fraudulent, offer no protection against the persecution
of the innocent. The Banks today classify a borrower as wilful defaulter. It means, in so
far as an honest entrepreneur is concerned, his Civil death. But to the crafty and
dishonest it is of no consequence. There is no statutory law as of today in so far as the
declaration of a defaulter as a willful defaulter is concerned. The Banks do so invoking
certain circulars issued by the RBI. The system where the Banker himself is the Judge
of his own cause, evinces no public confidence. It is in many ways scandalous
considering the propensity of the corruption prevailing in the Banking Industry. The
classification of a defaulter as wilful defaulter has to be regulated by law. The
Parliament has to enact law in this regard which shall provide for a fair and just, so too
expeditious, for classification of a borrower as a wilful defaulter with a provision for
Appeal to correct “errors within jurisdiction”. That job cannot be entrusted to the DRT.
Because the DRT’s have no expertise to do so. The question is, who could then do it.
The primary adjudication could be entrusted to an independent body, consisting of
experts in the realm of banking, finance, economy, law, auditing and industry. An
appeal thereof should lie before the civil court as is the case with many other
legislations.
24. In short the Banking scams which shocked the conscience of the nation as if a nuclear
explosion, at not so infrequent intervals are required to be dealt with the seriousness
and urgency the same calls for. Otherwise, the very future of the nation is at stake.
The 85% of the wealth of the nation being accumulated in the hands of a few will lead
to social unrest if not bloody revolution. The Banking system and our economy have to
be protected from those who have plundered it. The tax payers money can no longer
be allowed to be used to bail out the banks, because we have allowed the banks to be
plundered. Remedial measures are a crying need of the hour. Hence the instant
petition under Article 32 of the constitution seeking writs in the nature of mandamus
and/or directions and Order.
25. Hence, the instant Writ Petition under Article 32 of the Constitution on the following,
amongst other:- G R O U N D S
Grounds in support of the reliefs sought for are fairly elaborated in the statement of facts
above and hence are not repeated. The Petitioners however respectfully further adds
the following.
a. The principal remedy which the petitioners seek in the instant writ petition is a writ
in the nature of mandamus, a public law remedy of great antiquity and of universal
application, at least insofar as the common law jurisprudence is concerned.
Mandamus, though is a public law remedy could only be sought for the discharge
of a public duty by a public functionary. And, insofar as Article 13(2) is convened
for the enforcement of a public duty by an authority for the failure thereof entailing
the violation of fundamental rights. The petitioners have felt it only appropriate to
plead the said fundamental principles of constitutional law, while being fully
conscious that there is no need to plead law, because of the misconception that
the writ of mandamus for the discharge of public duty by a public functionary could
only be by way of a so called PIL.
b. The Petitioners are taxpayers. Every citizen in this country is a tax payer, for
nobody is exempt from indirect tax. The premise that only those who pay income
tax, alone, could be a taxpayer is a misconception which has its foundation in
feudalism. Every taxpayer, nay , citizen could, the Petitioners assert in all humility,
claim to be invested in him the fundamental right that the payment from the
consolidated fund of India, namely his money, shall not be allowed to be
plundered, pocketed, nay siphoned off. The Government of India has since 2007,
till date, pumped into the public sector banks about Rs. 1.2 lakh crores for
recapitalization. The first instance was in the year 2005 or so, to salvage IDBI by a
fund to the tune of Rs. 8000 crores. The parliament enacted the draconian
SARFASI ACT which has resulted in thousands of small time entrepreneurs and
traders who had availed of a few thousands and lakhs of rupees for their ventures
and business being forcefully dispossessed of their homes, without affording them
a restructuring of their facilities/loan, as they couldn’t service their accounts for
reasons beyond their control. Had the banks been little considerate and granted
them time, their ventures wouldn’t have been failed, they wouldn’t have been
rendered homeless. The case of the farmers was still worse. Since the banks did
not grant any facilities, the poor farmer had to borrow from money lenders,
sometimes at 120 percent of interest. Even where the banks had granted credit
facilities, the banks have shown no mercy to the farmers and sought recovery
through distraint, invoking the harsh revenue recovery laws. During the last 10
years, more than 10 lakhs farmers committed suicide, all because of the deep debt
trap they fell into. While the banks mercilessly took possession of even the
residential homes of the small traders and entrepreneurs, yet kept on granting
credit facilities without adequate securities. Sometimes, without any securities, as
in the case of Vijay Malya and Nirav Modi and their ilk. The petitioners are
practitioners in the banking realm and have been witnessing this, literally everyday,
with bated breath. The manner in which Malya was allowed to fleece and flee the
country, nay, its repetition, in Nirav Modi, in a manner even still shocking, makes
the Petitioners boil their blood, and it is in the above premises that the Petitioners
felt it appropriate to knock the doors of this court, not to blame the Modi govt.,
which some people are seen to be resorting to with immense joy; not even to
blame the UPA government, during which such daylight robberies took
astronomical proportions, but to seek remedial measures which are long overdue.
c. It is unnecessary for the petitioners to repeat the grounds, which they consider
could justify the reliefs sought for infra, which have elaborately been dealt with, in
the statement of facts. Paragraph _____, be read and treated as part of the
grounds in support of the prayers sought for infra.
26. The instant Writ is not barred by the by the doctrine of estoppel res judicata.
27. The Petitioners states that the Petitioners has no other efficacious alternative
remedy than to prefer the instant Writ Petition under Article 32 of the Constitution of
India.
28. That the Petitioners crave leave to add, amend or alter any of the foregoing grounds
with the permission of this Hon’ble Court.
29. The Petitioners has not filed any other petition, appeal or application other than the
one mentioned in this petition, before this Hon’ble Court or any other High Court
seeking similar reliefs as are sought in this Writ Petition.
P R A Y E R S
It is, therefore, most respectfully prayed that this Hon’ble Court may graciously be
pleased to:
a. Issue a Writ in the nature of Mandamus or any other appropriate Writ, Order or
directions, directing the Respondents to cause an investigation and to unearth the
fraud of the nature which is very likely to have been perpetuated by scamsters like
Nirav Modi, Vijay Mallaya in other Banks and even in the Punjab National Bank and
further not to extend facilities like the Letter of Undertaking as was extended in Nirav
Modi’s Case without the facilities being backed by collaterals sufficient enough to
meet the contingent liabilities;
b. To issue a Writ in the nature of Mandamus or any other appropriate Writ or Order
directing the Respondents to cause an audit of all funding/ guarantees based on
SWIFT messages, track the SWIFT trail of all Banking operations of more than 100
crores as also to reconcile such transactions with the core Banking system;
c. To issued a Writ in the nature of Mandamus or any appropriate Writ or Order or
direction, directing the Respondents No. 2 to 5 to cause an investigation into scams
both from the point of view of prosecution of the offenders but also from the point of
view of the total failure of the system internal checks and balances and in particular
the role of the various auditors, namely the RBI, the statutory, internal and C&AG
and of the Senior Management and to take such disciplinary action as warranted so
too bring in drastic changes in the audit and other mechanism of checks and
balances which will make fraud near impossible;
d. To issue a Writ in the nature of Mandamus or any other appropriate Writ, Order or
direction to secure the deportation of Shri. Nirav Modi and Mehul Chokshi but also to
take such steps to ensure that none of the promoters of the various Companies
which owe thousands of crores of rupees to the nationalized banks, leave the
Country and thus keep themselves beyond the reach of law as is the case with Vijay
Mallaya and Nirav Modi;
e. To issue a Writ in the nature of Mandamus or any other appropriate Writ or Order or
direction, directing the Union of India to create an independent body constituting of
experts in the province of Banking, Accounting, Auditing, to oversee the auditing of
Banks and Financial Institutions, particularly, as a watch dog of the various auditors,
namely the statutory auditors appointed under the Companies Act, the internal
Auditors of the Banks appointed by the Banks themselves, the Auditors of the RBI
and even of the C&AG so that there are no more scams like Satyam Scam, Mallaya
Scam, Winsome and Nirav Modi scams;
f. To issue a Writ in the nature of Mandamus or any other appropriate Writ or Order or
direction, directing the Union of India to consider the enactment of an appropriate
legislation banning of lending of money above 100 Crores with collateral securities of
equal value as also to requiring that such a valuation be conducted by valuers to be
appointed by the supervisory body to be created by appropriate legislation consisting
of representatives of the various investigative and regulatory bodies such as the
RBI, CVC, CBI, SEBI and the institute of Engineers (India) and the institute of
Chartered Accountants of India and the Institute of the Cost and Works Accountants
of India;
g. To issue a Writ in the nature of Mandamus or any other appropriate Writ or Order or
direction, directing the Union of India to consider with utmost gravity and urgency to
bring about appropriate legislation to exclude the small and medium enterprises,
professionals and traders, where the extent of credit facilities availed of is less than
5 crores from the provisions of the SARFAESI Act, as also to exclude one dwelling
unit (residential home) from the provisions of the SARFAESI Act, even where the
credit facilities extended is more than 5 crores but less than 10 crores, provided the
value of the residential home is less than 1 crore in small and medium towns and
more than 2 crores in metropolitan cities;
h. To issue a Writ in the nature of Mandamus or any other appropriate Writ or Order or
direction, directing the Government of India to consider the feasibility of dismantling
the multiple fora as of now in existence, namely, the Authorized officer under the
SARFAESI Act, the DRT and NCLT, all in substitution of the Civil Court which has
led to multiplicity of proceedings and in its place to establish one single Forum which
could deal with the inter se dispute between the lender and the borrower and
thereby eliminate multiplicity of proceedings and bringing finality of litigation, nay, res
judicata;
i. To issue a writ in the nature of mandamus or any other appropriate or any other
appropriate writ or Orders or direction, directing the Union of India to consider the
feasibility of denationalizing all the Public Sector Banks so that the Tax payers
money is no longer required to be invested for recapitalization of the public sector
Banks which had allowed its very foundation to be eroded by failing to prevent
banking fraud and bad loans which have reached astronomical proportions;
j. To issue a writ in the nature of mandamus or any other appropriate writ or orders or
direction, directing the Union of India to consider the feasibility of even enacting an
ordinance banning the promoters of Companies which owe the Banks and in
particular the Nationalized Banks more than 100 crores, from leaving the country
without the prior permission of the Government of India / the Competent authority to
be so authorized;
k. To issue a writ in the nature of mandamus to direct the Union of India to consider the
desirability of enacting a law of classification of borrowers as wilful defaulters where
the borrowers has resorted to fraud and diversion of funds and to disentitle him not
only of access to public funds but even to travel out of India with adequate
mechanism for Appeal against such orders by the person aggrieved in order to
correct the “error within jurisdiction”;
l. To issue a writ in the nature of mandamus or any other appropriate writ, order or
direction, directing the UOI to consider the feasibility of waiving of the entire loan in
the case of small farmers where the principal amount due is less than Rs.25 lakhs
and to waive the entire interest accrued in the cases where the principal amount
exceeds Rs.25 Lakhs but is less than Rs.5 Crore and further to grant liberal
installment facilities even to repay the principal amount where it exceeds Rs.25
lakhs so that the farmers suicide which has crossed the horrifying figure of ten lakhs
is brought to an end and to ensure that no farmer commits suicide being debt traped;
m. To issue a writ in the nature of mandamus or any other appropriate writ, order or
direction, directing the RBI and the Nationalised Banks to publish the list of willful
defaulters and further to declare that such right is invested in the citizens within the
ambit of Article 14 and 21 of the constitution, namely, the right to information.
n. To grant such other and further writs or Orders and directions which this Hon’ble
Court may most graciously be please to grant.
AND FOR THIS ACT OF KINDNESS THE PETITIONERS AS IN DUTY BOUND SHALL
EVER PRAY:
DRAWN BY:: FILED BY::
MATHEWS J.NEDUMPARA RABIN MAJUMDER
Advocate Code No.1825
New Delhi. AoR for the Petitioners
Drawn on:18.02.2018
Filed on: 21.02.2018