BOB and PNB issued LOCs in May and July 2020 as his companies owe ₹2,800 crore to them
In a setback to B.R Shetty, NRI entrepreneur and promoter of UAE-based NMC Healthcare, the High Court of Karnataka has rejected his plea against the action of the Bureau of Immigration restraining him from leaving India based on the Lookout Circulars (LOCs) issued by two public sector banks to whom his companies owe around ₹2,800 crore.
The immigration authorities on November 14, 2020 denied him permission to fly to Abu Dhabi in UAE from Bengaluru airport based on two LOCs issued by the Bank of Baroda (BOB) and the Punjab National Bank (PNB) in May and July respectively in relation to recovery of loans granted to companies promoted by him.
Justice P.S. Dinesh Kumar dismissed the petitions filed by Mr. Shetty while holding that action of the banks and immigration authorities could not be interfered with as the petitioner, as per the law, had an opportunity to approach the banks and explain to them that the LOCs were issued wrongly.
“Unless, Mr. Shetty exhausts the remedy of approaching BOB and PNB and explains to them as to how the LOCs have been wrongly issued, and the banks pass any further orders, his prayer to permit to travel to Abu Dhabi cannot be considered,” the court said.
On his claim that he was only the guarantor for the loans and that he had demitted the posts in the managements of the companies based in UAE and the banks had also initiated process in the UAE, the court said that the petition was liable to be dismissed on the threshold because of the admission by the petitioner that he was the guarantor as “a guarantor is equally liable to repay the debt.” Moreover, the petitioner himself was the promoter of these companies, the court noted.
The companies promoted by Mr. Shetty owe ₹2,000 crore and ₹800 crore to the BOB and the PNB respectively and he is the guarantor for the borrowed sums.
Poser to banks
Justice Kumar, in his order, pointed out that during the hearing of the petition the court had posed a query to the advocate representing the banks that on what security the banks permitted such large exposure. And the answer given of behalf of the banks was that “the companies [promoted by Mr. Shetty] to which loans are advanced were listed companies in London Stock Exchange and the share value had shown that the said companies had high net worth.”
Noticing that tangible assets, if any, mortgaged in favour of the banks by Mr. Shetty’s companies and their valuation were not forthcoming, the court observed: “If Public Sector Banks are permitting such a large exposure without adequate securities, it is a matter of great concern and it shall have serious adverse impact on the economy of this country.”
The court also observed that “it is time, the law makers and Reserve Bank of India re-visit the lending guidelines and the procedures and take necessary remedial measures to ensure that public money is well secured before disbursement.”
Mr. Shetty came to India in February last year and wanted to return to Abu Dhabi in November. He had contended that loans were borrowed in the UAE and not in India, and default in repayment occurred during 2019-2020 after he stepped down from the management of the companies in 2017.
Pointing out that the power, vested since 2017, with Chairperson of the banks to issue LOCs could be exercised only in exceptional cases against fraudsters, persons taking loans and wilfully defaulting, money launderers, etc., it was contended in his behalf that he did not fall under any such category.