The season of private companies defrauding public sector banks does not appear to be coming to an end. In yet another disclosure, Allahabad Bank has reported that SEL Manufacturing Ltd had borrowed from the bank and there are outstanding dues of Rs 688.27 crore from this company. The matter is now with the National Company Law Tribunal (NCLT) for resolution.
"We have to inform that a fully provided non-performing account, SEL Manufacturing Ltd (SELM) with outstanding dues of ₹688.27 crore for which NCLT proceedings are in progress," Allahabad Bank said in a regulatory filing.
The bank has qualified this account as a ‘fraud’ in a separate submission to the Reserve Bank of India. This means that the bank’s auditors would have found that the promoters of SEL Manufacturing would have sought the loan from the bank showing some genuine purpose and later diverted the funds to other activities. In most cases, such diversions directly lead to the situation in the borrowing companies turning from bad to worse and finally the lenders are left high and dry, as it has happened in this case.
Allahabad Bank must be hoping that part of the Rs 688 crore may get awarded by the NCLT once the proceedings at the Tribunal get over and the orders are passed. There is some uncertainty however there as the issue of financial creditors versus operational creditors in insolvency cases has now reached the Supreme Court.
NCLAT issued an order in the Essar Steel case that the two types of creditors be treated on par. Following this, operational creditors in around 200 cases have appealed to the NCLT to reopen them and award them a higher proportion of what was owed to them.
The earlier reported fraud of Rs 1,774.82 crore last week, by Bhushan Steel and Power Ltd (BSPL), also pertains to Allahabad Bank as well.