BackBank of Baroda to move Karnataka HC to bar BR Shetty from selling assets
Bank of Baroda plans to approach the Karnataka HC to restrain billionaire businessman B.R. Shetty from selling his assets, even those that are not pledged to the bankAs Shetty gave a personal guarantee on these loans, BoB believes that all his assets should be part of the injunction
PremiumMUMBAI : State-run Bank of Baroda (BoB) plans to approach the Karnataka high court to restrain billionaire businessman B.R. Shetty from selling his assets, even those that are not pledged to the bank, said two people aware of the development.
“The borrower’s loans with BoB are all standard at the moment and the lender has moved court only as a proactive step to ensure that its right to recovery is protected in case the borrower defaults later," one of the people cited above said requesting anonymity. As Shetty gave a personal guarantee on these loans, BoB believes that all his assets should be part of the injunction, this person said.
The bank had earlier sought a similar injunction from a sessions court in Bengaluru. The court offered partial relief and barred Shetty and his wife from selling or transferring only the 16 properties used as collateral for securing loans of ₹1,912 crore from BoB.
Banks are taking pre-emptive action against borrowers they fear might default amid an ever-increasing burden of soured assets. The Reserve Bank of India’s 7 June 2019 circular on stressed assets also calls for early recognition of stress and urges banks to work towards resolving it within 210 days.
“The present exercise is mostly aimed at securing the interest of the lender. The bank now wants to bar Shetty from liquidating any of his assets and has to convince the court that the borrower might liquidate these assets, affecting the recoverability of the loans," said Punit Dutt Tyagi, executive partner at Lakshmikumaran and Sridharan Attorneys.
Other lenders to Shetty plan to join BoB in efforts to recover loans, said the two people cited above. Union Bank of India, for instance, also has exposure to Shetty’s companies, but its outstanding loans could not be immediately ascertained.
BoB had, in the lower court, sought an injunction on sale of all movable properties, shares, mutual funds, funds deposited in bank accounts and fixed deposits of Shetty, according to court documents reviewed by Mint. Banks are expecting a surge in bad loans as economic activity has ground to a standstill because of the stringent lockdown for nearly two months. Curbs are now being gradually lifted.
BoB’s gross bad loans as a percentage of total advances stood at 10.43% (as on 31 December) from 10.25% in the September quarter of FY20. Charges against Shetty, the founder of NMC Health, a healthcare provider in the UAE, include under-reporting of debt and not using loans for the purpose they were raised.
Emails sent to BoB and to Shetty remained unanswered till the time of going to press. Mint reported on 30 April that Shetty has claimed innocence in the alleged financial irregularities in NMC Health and said he is pursuing legal action.
One of his firms, Unimoni Financial Services Ltd, has credit lines sanctioned from Indian banks such as Dhanlaxmi Bank, BoB, CSB Bank, Indian Overseas Bank and South Indian Bank, according to a list of registered charges available on the website of the registrar of companies.
“The loans to Shetty’s companies were from foreign banks and Indian banks’ branches in the UAE and in India. Some banks with less exposure abroad aim to join the probe in UAE and others in India might join BoB’s efforts," said the second person cited above.
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