Zoom Developers' court documents question banks' role

The documents produced before the Indore bench of Madhya Pradesh high court, which in November 2014 issued the order to wind up Zoom Developers Pvt Ltd, raise questions on the role of the banks that granted loan to the company without receiving adequate collateral.

The documents produced before the Indore bench of Madhya Pradesh high court, which in November 2014 issued the order to wind up Zoom Developers Pvt Ltd, raise questions on the role of the banks that granted loan to the company without receiving adequate collateral.

One of the country's biggest bank defaulters, about whom the Reserve Bank of India and financial intelligence agencies had alerted the Centre, Zoom Developers Pvt Ltd came in the limelight this week after the Enforcement Directorate (ED) attached his 1,280-acre California (US) land worth Rs 1,000 crore on money laundering charges.

Incorporated under the Indian Companies Act 1956 on October 29, 1991, with its registered office in Indore, the company was set up to launch infrastructure projects in India and abroad.

However, a majority of those projects existed only on paper. Company owner Vijay Choudhary is reported to be absconding.

Records submitted before the Indore bench of MP high court reveal that the company took out a loan worth `2,900 crore from 26 banks, even though it had assets worth just Rs 74 crore.

The company's balance sheet, which is unavailable after 2007, shows liabilities of `179 crore.

In 2009, Zoom Developers was not in a position to pay salaries to its employees. An employee, Zonathen Allen, moved court in 2010 to recover his dues worth Rs 3 crore and also requested the court to issue winding up orders to the company.

The main petition for shutting down the company was filed by The Hongkong and Shanghai Banking Corporation in 2010, following which the high court passed the order last year.

"It's public money. How could banks, especially the nationalised banks, disburse such a huge amount to a company with so little assets," Allen had told the court through his counsel during court hearings.

Of all the banks involved, Zoom Developers obtained the biggest loan worth `450 crore from Punjab National Bank (PNB). The State Bank of India too had granted a loan worth Rs 28 crore.

Documents submitted before the court suggest that the Reserve Bank of India and the 26 banks were resistant to the winding up petition filed in 2010.

Their contention was that "at present, the matter will prejudicially affect interest of consortium of banks as they have initiated action against SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act while PNB moved Debt Recovery Tribunal for recovery of `484.78 crore."

The company's winding up order passed by the high court last year states that a "consortium comprising 26 banks, with Punjab National Bank as its lead bank, had allowed bank guarantee and other facilities to respondent (Zoom Developers) in which the respondent had committed default."

After the order for the high court, the company's assets came under the purview of the official liquidator who has been tasked to sell them off to repay the banks.