Bank of Baroda cries foul as Gupta family’s funds frozen in South Africa

Bank of Baroda has argued that the 30 million-rand ($2.5 million) preservation order is wrong because the money due to clients had already been withdrawn, and the attachment of an equal amount of the lender’s own funds is “unsustainable”.

business Updated: Mar 01, 2018 17:42 IST
Renee Bonorchis, Bloomberg
Bank of Baroda,South African Reserve Bank,BoB in South Africa
The Bank of Baroda last year tried to close all accounts linked to the Gupta family after all other banks in South Africa had spurned their business.(Reuters )

India’s Bank of Baroda objected to the freezing of some of its funds in South Africa after it was alleged to have helped transfer money meant for the development of a government-backed dairy farm to the politically connected Gupta family and their associates.

The 30 million-rand ($2.5 million) preservation order is wrong because the money due to clients had already been withdrawn and the attachment of an equal amount of the lender’s own funds is “unsustainable,” Luke Spiller, a legal representative for the Bank of Baroda, said in the Free State province’s High Court in Bloemfontein on Thursday.

The court documents showed that other banks transferred cash to the same dairy farm but their money wasn’t frozen, making the order against Bank of Baroda unfair, the lawyer said.

The case is related to a state-owned farm in the Free State leased to Gupta-linked company Estina (Pty) Ltd. in 2012. The regional government agreed to help develop the land, but the High Court on Jan. 19 gave the National Prosecuting Authority permission to freeze the project’s assets after more than 220 million rand destined for the farm was said to have been transferred to Atul Gupta, one of three brothers, and a number of companies and associates.

| Read: How Bank of Baroda’s misadventures dragged it into South Africa’s political crisis

Atul Gupta and businesses linked to his family have applied to the same court to reconsider the attachment of the assets. The Gupta family have close ties to former President Jacob Zuma and have been accused of using the association to win state business and influence government appointments. Zuma and the Guptas have denied wrongdoing. The crackdown on the dairy farm project came just weeks after South African President Cyril Ramaphosa replaced Zuma as head of the ruling African National Congress.

The prosecutor’s papers are “a national embarrassment,” Michael Hellens, a lawyer acting for a number of Gupta-linked companies including Oakbay Investments Pty Ltd., said in the same court. The chief prosecutor failed to provide evidence that money destined for Estina went into accounts with the Bank of Baroda and then to the Guptas and their associates, he said.

Closed Accounts

The Bank of Baroda last year tried to close all accounts linked to the Gupta family after all other banks in South Africa had spurned their business. After a legal challenge the Indian lender wasn’t able to terminate the accounts and said last month it was going to have to leave South Africa.

| Read: Bank of Baroda to exit South Africa after controversies

Lender Nedbank Group Ltd. told Bank of Baroda at the end of January it would cut its ties after three months, Johannesburg-based Business Day newspaper reported on Wednesday, citing the most recent court filing of the South African head of Bank of Baroda, Manoj Kumar Jha.

Atul Gupta didn’t appear in Bloemfontein on Thursday and has previously denied in court documents that cash meant for the development of the dairy farm was transferred to his private bank accounts. Eight people accused in the case appeared in court last month and were granted bail. They were arrested on charges of fraud and theft related to the project.

Atul Gupta and his brothers weren’t among those arrested. Ajay, one of the siblings, has been declared a fugitive from justice by the South African police.

First Published: Mar 01, 2018 17:41 IST