Explained: Why Ex-SBI Chief Pratip Chaudhari Was Arrested By Rajasthan Police

The banking community has rallied behind Pratip Chaudhari, a former Chairman of the State Bank of India, who was arrested by the Rajasthan Police and sent to 14-day judicial custody in an case involving an asset reconstruction company and an aggrieved borrower.

His bail please has been rejected and he is in custody till November 15.

Several former colleagues of Chaudhari have expressed support and attested to his personal integrity. They are questioning the move to arrest the former banker over a transaction that they claim is standard in the banking industry.

"Prima facie, it appears that the norms have been ignored. The norms have been ignored. This is not the way it is done, without giving an opportunity to a person to be heard. It does not appear to be a case of corruption," said former SBI Chairman Rajnish Kumar to the Times of India.

In a response to a tweet, Kumar also called the action by the Rajasthan Police 'ridiculous', and called for bankers to call out the police.

Former SBI chief Arundhati Bhattacharya, who succeeded Chaudhari as the first women chairperson of the bank, also said, "I can attest to the fact that Mr Chaudhuri is absolutely and scrupulously honest and there is absolutely no wrongdoing on his part. This is an unfortunate day for bankers when a senior banker is taken to task like this without doing anything wrong."

Sunil Srinivasan, a former Deputy Managing Director of SBI, who worked under Chaudhari, said that the system is being gamed despite efforts by the government to increase transparency and accountability.

The Indian Banking Association - the lobbying body of the banking sector - has further sought to engage with the Government of Rajasthan, including the Chief Minister Ashok Gehlot, and with the Union Finance Ministry.

The body has expressed concerns in the past over bankers getting arrested for genuine business decisions gone wrong. RP Marathe, former Managing Director and CEO of the Bank of Maharashtra was arrested by the Pune Police in 2018 for allegedly using his power to sanction huge loans to shell companies. Marathe was later reinstated, after Pune police filed a closure report saying that no evidence of wrongdoing were found. In 2017, the CBI had arrested former IDBI Chairman Yogesh Agarwal and four other officials in the Kingfisher Airlines ₹ 900 cr loan default case.

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Why was Chaudhari arrested?

Chaudhari was arrested on October 31 in a case related to a hotel project, Garh Rajwada, in Jaisalmer, which was financed by SBI in 2007 for ₹24 crores.

No progress was made on the project for three years, until the promoter of the Godawan Group, who managed the project, passed away in April 2010. The bank declared the project a non-performing asset in June 2010.

The asset worth ₹200 crores, was then sold to Alchemist Asset Reconstruction Limited for Rs 25 cr. Chaudhari later joined the board of Alchemist in October 2014 after retiring from the bank.

But SBI says that all due processes were followed in the transaction.

According to the bank, the borrower had initially filed an FIR against the sale, but was not satisfied due to its negative closure. Therefore, it filed a 'protest petition' with the Chief Magistrate, who named Chaudhari and all the directors of Alchemist Asset Reconstruction Limited in the case. SBI said that since they were not made a party to the case, they have not got a chance to be heard.

Chaudhari has been accused under section 420 of the Indian Penal Code (cheating and dishonesty including delivery of property), 409 (criminal breach of trust by public servant, or by banker, merchant, or agent) and 120B (criminal conspiracy).

Additional SP Narendra Choudhary told the Indian Express, "There was a five star property in Jaisalmer worth around Rs 200 crore. Following a default (by the property owners) it was decided – by the highest levels of SBI – to sell it. And the bank sold it for about Rs 25 crore. Thus, a particular group gained a profit of Rs 175 crore. They followed the procedure, but the intention was malafide."

Alchemist has also issued a statement on the issue, where they have called Chaudhari's arrest "bizarre", and said that the case is taking the legal system for a ride.

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