Excerpt: Pandemonium: The Great Indian Banking Tragedy by Tamal Bandyopadhyay

A new book reveals the inside story behind a spate of banking scandals. This excerpt provides a glimpse into the Kingfisher saga and the CBI investigation of the case
When Kingfisher was still flying high.(Santosh Verma/BLOOMBERG NEWS)
When Kingfisher was still flying high.(Santosh Verma/BLOOMBERG NEWS)
Updated on Oct 30, 2020 04:02 PM IST
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Hindustan Times | ByTamal Bandyopadhyay
544pp, Rs695; Roli Books
544pp, Rs695; Roli Books

Fear Psychosis

Flashback to 23 January 2017

Neighbours of BK Batra, 61, a former deputy managing director of IDBI Bank, saw him walking briskly in Sheila Raheja Park at Mumbai’s western suburb of Malad East, as he did every morning.

By the time he returned to his apartment at Raheja Residency on General AK Vaidya Marg, a few minutes’ walk from the park, a posse of CBI officers had already entered the complex.

They pressed the bell at Batra’s third-floor apartment and presented him with a search warrant. The reason was IDBI Bank’s exposure to the defunct Kingfisher Airlines of Vijay Mallya.

Around the same time, different teams of CBI officers were going through the same exercise at the apartments of four retired IDBI Bank executives at Oshiwara and Santacruz West in Mumbai, Hiranandani in Thane and Exotica Housing Complex on Golf Course Road at Gurgaon, Haryana.

All of them were asked to keep their mobile phones, laptop and iPad on a table and not allowed to make any calls. A thorough search was conducted at every place. At the end of it, inventories were made listing the fixed deposit receipts of banks and bank account details, locker keys, jewellery, etc – a normal practice. The duration of the search was different at different houses.

The CBI SP in Mumbai, Jagroop S Gusinha – who was to later get the police medal for meritorious service – was overseeing the entire operation. By late evening, when the searches were complete, the officers asked Batra to accompany them to the CBI office at Plot No C-35A, Block G, Bandra Kurla Complex in Mumbai. A colleague of Batra says the CBI officers did ask him whether he would like to take his medicines along, but Batra did not catch the hint.

When Batra reached the CBI office around 10 pm, three of his former colleagues – OV Bundellu (retired deputy managing director), SKV Srinivasan (retired executive director) and RS Sridhar (a retired general manager from the bank’s project appraisal department) – greeted him at the 3rd floor office. Batra, who had retired as a deputy managing director, was an executive director in the bank when he was handling the Kingfisher loan proposal.

The CBI had picked them up from their homes in the Mumbai suburbs and brought them to its office at different times and arrested them. In the same hall, A. Raghunathan, former CFO of Kingfisher Airlines, and three other former executives of the defunct airline – Shailesh Borker, AC Shah and Amit Nadkarni – were also present. They all exchanged glances and nervous smiles.

You are Under Arrest

The office of Suman Kumar, the CBI’s additional SP, is on the fourth floor. Bundellu, Srinivasan and Sridhar had already met him. Batra too had to undergo the ritual of being formally placed under arrest. Why?

None of them was told the reason. They were not allowed to contact any lawyer but could call up their families and inform them of their arrest. All of them did so, using the CBI officers’ mobile phones.

That was not needed though since their wives and children already knew. The TV channels had been flashing the news of the arrests and searches non-stop. The raids had been conducted at 11 different locations including Mallya’s residence in New Delhi, three floors of UB Towers in Bengaluru and the residences of bankers and Kingfisher Airlines officials.

By late night, they had to leave all their belongings – wallets, credit and debit cards and even belts – in the CBI’s custody. One constable was assigned to each of the four senior bankers and four Kingfisher officials. All eight were asked to sleep in a room on a durrie. There was no pillow or blanket.

There were no mosquitoes but none of the men could sleep through the long night. In the morning, the bankers repeated their request to CBI officers to permit them to make calls for legal help but it was denied. They were, however, allowed to call up their family from the office landline

They had to skip their morning ritual of brushing their teeth as they had not brought toothbrushes. Sipping their morning cup of tea, the IDBI Bank officials were surprised to see their former boss Yogesh Agarwal join them.

Like them, Agarwal had been picked up from his residence in Gurgaon, Haryana, and flown in from Delhi the previous night. He had been kept in another room.

Agarwal, a former managing director of State Bank of India, took over as chairman and managing director of IDBI Bank, in July 2007. After a three-year stint, he became the chairman of the Pension Fund Regulatory & Development Authority in June 2010 and resigned in November 2013 before completing his five-year term.

All of them were taken for a routine medical check-up at a nearby hospital and then brought back to the canteen at the CBI office for lunch. Then they were taken to the Sessions Court at the Old Secretariat Building, Kala Ghoda, beside Mumbai University at Fort, Mumbai,

It transpired the bank had arranged for their legal support. As the chargesheet had already been filed, the investigation should have been completed. But the court refused to grant them bail. They were sent to judicial custody.

In the same bus, accompanied by the same set of constables, the five bankers and the four airline executives were ferried to the Mumbai Central Prison, also referred to as the Arthur Road Jail, on JR Boricha Marg, Lower Parel, Mumbai.

Arthur Road Jail

What unfolded at the jail was surreal – very different from what we typically see in Bollywood movies. All nine were put into a large hall, called a barrack, which housed at least a couple of hundred others. There were three rows of bare durries on the floor to sleep on but that night there was no pillow or bedsheet.

There was virtually no space between the sleeping inmates, making it difficult for anyone to turn over without touching somebody. Since they were all undertrial prisoners, there were no jail uniforms for them.

This was a barrack for the undertrials – the senior citizens (without any special facilities for them) and the underage (juvenile) and those who were in transit, returning from court hearings. Pillows and blankets were in short supply and prisoners would just need to grab what they could.

A big blackboard in the hall lists the entitlement of each undertrial – a dish for meals, a glass, two katories and a teacup. In real life, they were given none of these; they had to get the utensils from the common pool, wash them after use and put them back in the common pool.

In the initial days, plastic mineral water bottles were cut up to make cups for drinking tea. Upma, poha or halwa was the staple breakfast; lunch and dinner consisted of rice, chapatti, dal and vegetable. The less said about the quality of the food, the better, but there was no choice but to gulp it down for sustenance. On festival days, the kitchen served non-vegetarian food.

There were four toilets within the barrack, shared by the 200-plus occupants. The senior citizens found the Indian-style squat toilets extremely difficult to use but there was no alternative. There were a few more toilets outside the barrack, in the compound, but those were also squat latrines and prisoners could use them only at certain hours of the day.

There was only one bathroom where they could take baths; in the open compound, there was provision to wash their clothes with soap provided by the jail authorities. The meals were served outside the barrack but one could carry their plates indoors to eat.

‘The Kingfisher Gang’

In the barrack, these nine people were called the ‘Kingfisher Gang’. They could meet a relative once a week, from behind a glass wall and talk for a few minutes on the intercom. The lawyers could come and meet them more frequently in the mornings. But all meetings were in the presence of jail staff.

Daily newspapers, a few for the entire barrack, were their only other window to the outside world.

Judicial custody is always for two weeks. This means, every two weeks, the undertrials were taken to the court where a judge would hear their bail petition. Bundellu, Srinivasan and Sridhar were released on bail in the second week of February, after 18 days. But Agarwal and Batra were not so lucky. They had to move an appeal at the high court and spend many more days in this hellish environment.

Those who had seen them in the barrack say Agarwal used to lose his cool over trivial things like the tea being lukewarm or somebody sneezing near him. The two bankers were treated in the same way other undertrials were, many of whom were criminals, but at least the bankers were spared the slaps and abusive heckling faced by the others.

The bankers would eagerly look forward to bail-hearing day in court when they could meet their family and get some home-cooked food.

Finally, on 17 March 2017, the Bombay High Court granted bail to Agarwal and Batra after they had spent 54 days in judicial custody. Justice Sadhana S Jadhav granted the bail on sureties of Rs1 lakh each.

The judgment says:

In the present case, (the) respondent (CBI) is unable to substantiate the contention as to why further incarceration of the applicants is imperative after filing of the charge-sheet. At the time when they were presented before the magistrate also, respondent-investigating agency had sought for judicial custody and therefore, it cannot be said that the interrogation of the present applicants would be necessary. In any case, after initial 15 days of judicial custody, (the) CBI cannot pray for police custody for the purpose of interrogation… The case rests upon documentary evidence and there would be no question of tampering of evidence more so when both applicants have retired on superannuation. It is in these circumstances that this court is of the opinion that applicants deserve to be enlarged on bail.

Author Tamal Bandyopadhyay (Courtesy Roli Books)
Author Tamal Bandyopadhyay (Courtesy Roli Books)

The 183-page chargesheet alleges that IDBI Bank sanctioned and disbursed Rs150 crore on 7 October 2009, Rs200 crore on 4 November 2009 and Rs750 crore on 27 November 2009 despite weak financials, negative net worth and low credit rating of the borrower. This was in violation of the corporate loan policy of the bank.

The chargesheet also refers to meetings held between Vijay Mallya and Agarwal on a holiday.

It alleges that a significant portion (Rs263.48 crore) of the funds was transferred by Kingfisher Airlines to other accounts through Axis Bank, ICICI Bank and Bank of Baroda. Part of the money was used to service the company’s debt to different banks and non-banking financial companies, including IDBI Bank.

The Kingfisher Loan

The proposal for the sanction of a corporate loan of Rs950 crore was submitted by Kingfisher Airlines’ chief financial officer Raghunathan and marked for the attention of Batra. The chargesheet also mentions Raghunathan referred to a meeting between Mallya and Agarwal in a letter dated 6 October 2009 and requested the bank to lend the airline Rs150 crore for six months to pay overseas vendors.

Mallya’s meeting with Agarwal took place in the last week of September 2009. The application for Rs950 crore loan was submitted a few days after the meeting, on 1 October. Realising that the detailed appraisal of the main loan application was likely to take time, Kingfisher asked for a Rs150 crore short-term loan to meet its urgent and critical requirements. This request was processed by the bank on priority and approved on 7 October 2009.

Raghunathan, again referring to Mallya’s meeting with Agarwal, sought an ad hoc release of Rs200 crore and, on 4 November, IDBI Bank sanctioned a short term loan of Rs200 crore.

This ad hoc release was against the main loan of Rs750 crore already under process and it was to be adjusted against the sanction of Rs750 crore. This was done.

After the sanction of Rs750 crore loan, the Rs200 crore ad hoc loan was extinguished. Only two loans remained on IDBI Bank’s book. One was a shortterm Rs150 crore loan and the other, a long-term loan of Rs750 crore.

The short-term loans were disbursed while the original proposal for a corporate loan of Rs950 crore was being processed. The proposal was placed first before the credit committee on 19 November 2009 and later, on 27 November 2009, the bank’s executive committee of the board of directors approved a corporate loan of Rs750 crore.

The total requirement of funds for Kingfisher was Rs2,000 crore as assessed by SBI in its detailed appraisal note. SBI and three other banks had already sanctioned and also disbursed Rs1,050 crore when the airline approached IDBI Bank for the balance Rs950 crore.

S Ananthakrishnan, executive director, in charge of large corporate groups, who was overseeing the Kingfisher Airlines account, died in 2016. There were a few others involved in the loan process but the investigative agency picked up only the retired bankers.

Agarwal and Bundellu had retired from the bank in 2010. Batra and Srinivasan retired in July 2016. The last of them, Sridhar, who was reporting to Ananthakrishnan, retired in December 2016. They were all arrested in January 2017.

The CBI needs the government’s permission to act against serving officers. Agarwal’s meeting with Mallya had not been a clandestine affair. It was on his calendar and the meeting took place in his chamber in the presence of other officers of the bank and of the airline. His secretariat staff was also present in the office. In IDBI Bank and even other banks the chairman coming to office on a holiday is not rare.

A close look at the Kingfisher–IDBI Bank saga reveals that there were deviations from some parameters while sanctioning the loan. But there was no violation of the corporate loan policy of the bank. The deviations were permissible within the policy. …

Money Laundering

A month after Agarwal and Batra emerged from Arthur Road Jail on bail, the Enforcement Directorate stepped in to explore the money laundering angle in the case. The directorate served a summons to all five bankers and, by July 2017, it filed a fresh complaint.

In November 2017, after several hearings of the case in the Special Court that deals with cases related to the Prevention of Money Laundering Act, bail was granted to all the five.

As I write this chapter in May 2020, they need to appear before the court every month and they cannot leave India without the permission of the court. This may continue indefinitely. But another shock was also in store for these hapless retired bankers: IDBI Bank stopped extending legal support and asked them to refund the money that it had already spent on their behalf.

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Monday, November 29, 2021