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legal | IST

Former SBI chairman Pratip Chaudhuri's arrest a case of overreach? Experts weigh in

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The former SBI chief was arrested on orders of the chief judicial magistrate of Jaisalmer because SBI allegedly sold a Rs 200 crore collateral for a mere Rs 25 crore to Alchemist ARC. Chaudhuri was then granted bail on November 9 by Additional District and Sessions Judge Dalpat Singh Rajpurohit.

The arrest of former SBI chairman Pratip Chaudhuri has rattled the banking and finance community. The former SBI chief was arrested on orders of the chief judicial magistrate of Jaisalmer because SBI allegedly sold a Rs 200 crore collateral for a mere Rs 25 crore to Alchemist ARC, a company in which Chaudhuri later became director.
Back story: What we know
A company called Hotel Gaudavan Pvt Ltd took a Rs 24 crore loan for their Jaisalmer hotel in 2007. The project was not completed, the company defaulted, and the loan turned NPA (non-performing asset) in 2010. The hotel was given as collateral for the loan.
SBI auctioned the loan to asset reconstruction companies who are specialists in recovering or restructuring distressed companies. SBI got bids from 11 ARCs - the highest was by ARCIL at Rs 18 crore, Alchemist ARC bid at Rs 16 crore versus SBI's reserve price of Rs 40 crore.
SBI asked bidders if any party would raise their price. Alchemist agreed to raise its bid to Rs 24 crores while ARCIL refused to counterbid. The bid went to Alchemist in March 2014. Pratip Chaudhuri joined Alchemist in October 2014.
Alchemist took the borrower to bankruptcy court and acquired the property. The borrowers tried FIRs, arbitration etc against Alchemist, but these were quashed by the Supreme Court and the hotel was sold by Alchemist to a related company, JC Finance. While the sale was okayed by the NCLT, the borrowers challenged it. However, the NCLAT and then the Supreme Court also approved the deal.
Unknown to Alchemist and Pratip Chaudhuri, the borrowers had sought another FIR that the police had refused and closed the case, but it was taken by the borrowers to the chief magistrate as a protest petition and the judge ordered the arrest apparently because several summons were not answered by Alchemist.
Chaudhuri was then granted bail on November 9 by Additional District and Sessions Judge Dalpat Singh Rajpurohit.
The analysis
In an interview with CNBC-TV18, Majeed Memon, Criminal Lawyer and Former MP of Rajya Sabha said that this appears to be a case of miscommunication.
"The issuance of arrest warrant by the learned magistrate appears to be the result of non-compliance to the earlier call to the court. The summons remained to be served. It enraged the court because the court was wanting the accused to be before the court. So there would not have been an arrest had he attended the court," he said.
Arvind Datar, Lawyer said that the law is very clear on when you can and cannot arrest a person.
"The sad thing is nobody is following them. So the time has come to amend the law and to bar arrest completely. What has happened to Pratip Chaudhuri is not an isolated case. It very often happens. We have seen the law being misused again and again," he said.
Watch the video for the entire discussion.