The two Non-bank lenders Reliance Home Finance and Reliance Commercial Finance have got Interim stays against Punjab National bank(PNB) and Bank of Baroda(BoB) from classifying the two companies as fraud accounts.
On 11th and 14th of August Delhi High Court has issued an orders, where on 11th August order was pertains to PNB’s classification its companies as fraud and on 14th August rulings are in cases against Bank of Baroda. According to copies of the order, the primary complaint of the two companies is that before the banks decided to proceed with the classification they were not given a hearing.
The court said, “Respondent No. 1 (PNB) will maintain status quo as of today (11th August) regarding the impugned.” inspite of it, the court clarified that PNB is free to issue a show- cause notice to the petitioners, give a hearing through video conferencing, and then pass an order as per law”.
The court further added, “It also made clear that the respondent No 1 (PNB) is free to take any steps/investigation/file any complaint/proceedings against petitioner number one (both the companies) as per law independent of the aforesaid order declaring the account of petitioner number one as a fraud account”.
In the case against BoB, the High court said “placing of the petitioner in the category of fraud shall be kept in suspension till the next date. The respondent bank shall not take any steps prejudicial to the interest of the petitioners.”
Both non-bank lenders said against PNB that inspite the consortium of lenders met on 6 June, no notice was sent to them and even the minutes of the meeting were not provided.
The petitioner number one stated, on 28 July 2020, it was shocked to hear from the queries that media raised on the respondent number one(PNB). It has classified the account of petitioner number one as fraud. It seems that respondent number one had informed the other banks over the such classification.
The total outstanding loan of the company till 3 July 2019 stood at Rs 7,109 crore. Reliance Commercial Finance’s total borrowings, including debt securities, stood at Rs 9,812 crore as of 31 March.
According to RBI rules,the banks need to keep aside 100% of the outstanding loans as provisions if an account is declared fraud, either in one go or over four quarter.
