Parekh Aluminex loan fraud case: CBI court refuses to discharge then CMD of Corporation Bank

Ramnath Pradeep, 73, the former chairman and managing director (CMD) of the Corporation Bank (now Union Bank of India), extended a working capital of ₹60 crore to Parekh Aluminex, which later became a non-performing asset (NPA), resulting in a loss of ₹84.44 crore to the bank

MUMBAI: A special Central Bureau of Investigation (CBI) court recently refused to discharge Ramnath Pradeep, 73, the former chairman and managing director (CMD) of the Corporation Bank (now Union Bank of India), in the Parekh Aluminex loan fraud case.

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Special CBI judge BY Phad observed that the prosecution had presented documentary and oral evidence to support specific and serious accusations levelled against him. The allegations against the 73-year-old Wadala resident are based on a pattern of deliberate and interconnected acts, said the court. “A full-fledged trial is necessary to determine the truth of the accusations.”

The CBI registered the case against Parekh Aluminex and its late chairman and managing director (CMD) Amitabh Parekh, along with several others, for allegedly defrauding a consortium of banks, including SBI, Exim Bank, PNB, and UBI. The company, claiming to be “the world’s largest manufacturer of aluminium foil containers, aluminium foil rolls, and aluminium lids,” had taken loans. However, Parekh suddenly passed away on 6 January 2013, at the age of 39 years, when the total outstanding amount against the company was ₹2,762 crore. The CBI had also found that Corporation Bank had, during Pradeep’s tenure as CMD in 2011, extended a working capital of ₹60 crore to Parekh Aluminex, which later became a non-performing asset (NPA), resulting in a loss of ₹84.44 crore to the bank.

The retired banker had sought discharge from the case, contending that there was no prima facie evidence showing his involvement in the offences. He claimed that his awareness of the loan proposal was part of his administrative role, and there was no direct or indirect material suggesting a dishonest intention, criminal misconduct, or personal gain on his part. He had merely exercised commercial judgment based on recommendations from lower-level bank officers, and the loan was sanctioned after being appraised and recommended by the credit department and other officials, his advocate said.

“The approval process followed the bank’s internal credit policy, with no red flags reported at the time. The applicant, as CMD, relied on the due diligence of competent officials and didn’t have a role in verifying documents,” Pradeep’s advocate contended. He also attributed the account’s NPA status to the promoter’s untimely death and the fact that his successor extended the same credit facility terms.

The CBI had opposed the plea, stating that Pradeep had abused his official position and sanctioned the loan through corrupt and illegal means, causing a wrongful loss to the bank. There was no need for Corporation Bank to join the consortium, as existing members had already agreed to their share of enhancement. The then CMD, Pradeep, unnecessarily exposed Corporation Bank without obtaining a mandatory NOC from the lead bank.

The agency also pointed out that while Pradeep initially sanctioned the loan with a stipulation for close monitoring, he later approved a modification that conveniently eliminated the need for a NOC from the lead bank. This reversal, the CBI claimed, was a deliberate step to facilitate the fraudulent disbursement of a clean loan without collateral. Pradeep continued to extend timelines for the bank’s entry into the consortium, which demonstrates his sustained effort to aid the borrower’s non-compliance, the agency added.

“The evidence indicates a deliberate, active, and instrumental role in facilitating a fraudulent loan, which goes far beyond a mere administrative or passive act,” the special court said last week while dismissing his discharge plea.