Karnataka HC rejects NRI businessman B.R. Shetty’s plea against banks’ lookout circulars

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 motion of the Bureau of Immigration restraining him from leaving India based mostly on the Lookout Circulars (LOCs) issued by two public sector banks to whom his firms owe round ₹2,800 crore.

The immigration authorities on November 14, 2020 denied him permission to fly to Abu Dhabi in UAE from Bengaluru airport based mostly on two LOCs issued by the Bank of Baroda (BOB) and the Punjab National Bank (PNB) in May and July respectively in relation to restoration of loans granted to firms promoted by him.

Justice P.S. Dinesh Kumar dismissed the petitions filed by Mr. Shetty whereas holding that motion of the banks and immigration authorities couldn’t be interfered with because the petitioner, as per the legislation, had a possibility to strategy the banks and clarify to them that the LOCs had been 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 docket stated.

On his declare that he was solely the guarantor for the loans and that he had demitted the posts within the managements of the businesses based mostly in UAE and the banks had additionally initiated course of within the UAE, the court docket stated that the petition was liable to be dismissed on the edge due to 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 those firms, the court docket famous.

The firms promoted by Mr. Shetty owe ₹2,000 crore and ₹800 crore to the BOB and the PNB respectively and he’s the guarantor for the borrowed sums.

Poser to banks

Justice Kumar, in his order, identified that throughout the listening to of the petition the court docket had posed a question to the advocate representing the banks that on what safety the banks permitted such giant publicity. And the reply 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 property, if any, mortgaged in favour of the banks by Mr. Shetty’s firms and their valuation weren’t forthcoming, the court docket noticed: “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 docket additionally noticed 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 got here to India in February final yr and needed to return to Abu Dhabi in November. He had contended that loans had been borrowed within the UAE and never in India, and default in reimbursement occurred throughout 2019-2020 after he stepped down from the administration of the businesses in 2017.

Pointing out that the ability, vested since 2017, with Chairperson of the banks to problem LOCs might be exercised solely in distinctive instances against fraudsters, individuals taking loans and wilfully defaulting, cash launderers, and so forth., it was contended in his behalf that he didn’t fall below any such class.