Bank dismisses mis-selling charges, says lawsuit filed after it initiated legal recovery action over loan default
Five
entities belonging to an investor have filed a lawsuit against ICICI
Bank UK in Belgium, where the bank has a branch, claiming compensation
of about $130 million, lawyers close to the development have said.
The entities have accused the bank of mis-selling financial products, which led to a loss of a $32 million to the group.
The claim for compensation is for the loss incurred, mis-selling and consequential damages.
The bank has, however, denied any wrongdoing.
“ICICI
Bank has lending relationships with the customer. After the customer
defaulted on its payments, the bank has initiated legal recovery actions
against the assets of the customer to protect its interests. As a
counter, the customer has filed a complaint against the bank for an old
facility, which the customer repaid a few years ago.
“The bank
has vigorously denied and rebutted all allegations and claims made by
the customer. The matter is sub judice in a Belgium court,” an ICICI
Bank spokesperson said in an e-mailed response to query by Business
Standard.
It is learnt the bank attached the customer’s assets in Hong Kong after it defaulted on the loan.
According to people familiar with the development, the alleged
mis-selling was in 2007-08; the lawsuit was filed early this year.
Currently, the plaintiffs and ICICI Bank UK are giving submissions to
the court. A hearing is scheduled for
June 2015.
It has been
alleged though the bank sold financial products such as snowball
interest rate swaps, targeted accrual redemption note options and Box
options, it did not explain the risks.
ICICI Bank UK is one of the three foreign subsidiaries of ICICI Bank; the others are in Canada and Russia.
ICICI Bank UK has nine branches in the UK and one each in Belgium and Germany.
At the end of September this year, ICICI Bank UK’s total assets stood
$4.16 billion, while loans and advances were $2.71 billion.
For the quarter ended September, the bank recorded a profit after tax of $5.1 million.
At the end of the quarter, the bank’s capital adequacy ratio was 23.1 per cent.
Wilful defaulter tag: high court rules in favour of Kingfisher Airlines directors-LiveMint
Calcutta
HC rejects United Bank of India’s decision to tag Kingfisher Airlines
directors as wilful defaulters on technical grounds
The Calcutta high court has said that state-owned lender United Bank of India’s decision to tag directors at Kingfisher Airlines Ltd as wilful defaulters has been rejected on technical grounds, two people close to the development said.
On Friday, the court said that the grievance redressal
committee at United Bank, which called the shots on tagging promoter Vijay Mallya
and three other directors at Kingfisher Airlines as wilful defaulters,
constituted of four members, instead of three, as mandated by Reserve
Bank of India (RBI).
“The
decision was taken by the court on very technical grounds. We have an
option to do the whole process again and declare him (Mallya) as a
wilful defaulter again, which will take roughly a month’s time. We can
also appeal against the court’s decision since no prejudice was caused
against the borrower by having one extra member. We will take that call
shortly,” said United Bank executive director Deepak Narang.
Narang
said that even though the court decided against the wilful defaulter
tag, it had upheld all the evidences that the bank had produced against
Kingfisher Airlines.
In
its master circular for classification of borrowers as wilful
defaulters released in July 2012, the banking regulator states that in
order to maintain transparency in the process, the decision to classify
the borrower as wilful defaulter should be entrusted to a committee of
higher functionaries headed by the executive director and consisting of
two general managers or deputy general managers as decided by the board
of the concerned bank or financial institution.
“Decision
of the Hon’ble Court is self explanatory. No further comment,” a
Kingfisher Airlines spokesperson said in a one-line response.
On
1 September, the Kolkata-based bank became the first lender to have
tagged Mallya, A.K. Ganguly, Subhash Gupte and Ravi Nedungadi as wilful
defaulters as per the RBI norms. United Bank has an exposure of around Rs.350 crore to the beleaguered airline which has been grounded since October 2012.
In
an official statement, Kingfisher Airlines had then vowed to pursue
“all available legal remedies” to secure its interest. The airline had
been demanding that United Bank permit it to have legal representation
of its choice at the hearing to be held before the grievance redressal
committee set up by the lender. The court had directed Vijay Mallya to
be present in person or through a company official when dealing with the
committee.
The
statement had alleged that the bank took the step even though the
airline’s special leave petition against the Calcutta high court order
is pending in the Supreme Court.
A
wilful default occurs when either a borrower has not repaid when he can
do so; when sanctioned funds have been diverted for other purposes;
when the borrower has siphoned off funds; or when the borrower disposes
of the assets pledged for availing of the loan without the bank’s
knowledge.
Once
a director of a borrowing company is tagged as a wilful defaulter,
banks could deny further loans to any company where he is present as a
director. Banks would also be empowered to use loan recovery options
aggressively.
Kingfisher Airlines owes Rs.6,521
crore to a lender consortium led by State Bank of India (SBI),
according to the finance ministry. A few other state-owned banks,
including SBI, are also in the process of deciding on the wilful
defaulter tag for the airline.
