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Karnataka HC Refuses For CBI Case In Bank Scam

The court also said merely because a recovery petition is pending, the criminal proceedings against the accused cannot be terminated

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The Karnataka High Court has refused to quash an FIR and case in the special CBI court in Bengaluru against the managing director of a company who along with others are accused of cheating the IFCI of over Rs 200 crore.

Two loans of Rs 90 crore and Rs 100 crore were obtained by a company, VNR Infrastructures, and its managing director Vakati Narayana Reddy mortgaged two separate sets of properties in Mahabubnagar and Rangareddy districts of Telangana.

The fair value of the mortgaged property in Mahabubnagar was valued at Rs 257 crore and distress sale value at Rs 231 crore.

Correspondingly, the properties in Rangareddy district were valued at Rs 320 crore and Rs 256 crore, respectively.

The loan was sanctioned in 2015 and the company started defaulting on repayment the same year.

In 2019, the loans were classified as non-performing asset (NPA) and the loan stood at Rs 205 crore. Recovery of the loan was initiated under the SARFAESI Act.

To the shock of IFCI, it was found that the distress sale value of the properties situated in Mahbubnagar was only Rs 23.84 crore and for the properties situated in Rangareddy district was Rs 6.04 crore.

Both the fair value and distress value was inflated by the valuators.

A complaint was filed by Pooja Tiku, deputy general manager of IFCI Limited on May 3, 2017 against VNR Infrastructures and its MD Reddy for committing fraud on IFCI to the tune of Rs 205.02 crore by way of misappropriation, cheating and criminal misconduct.

The complaint also named seven others, including the original valuators, who had inflated the land value.

Reddy's case to quash the case against him and stay the FIR came up before Justice K Natarajan of the Karnataka High Court. The court rejected both the criminal petitions.

"The fraud has been committed on the public sector financial institution and caused huge loss by the accused to the public financial institution which affects the interest of the public at large," the court said dismissing the petitions.

The court also said merely because a recovery petition is pending, the criminal proceedings against the accused cannot be terminated.

The HC rejected the contention that borrowing loan and non-repayment amounts to a civil dispute. It said that this case presented different facts and circumstances where the loan was borrowed by manipulating documents with the help of other accused and a fraud was committed on a government financial institution.

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