2001 Rs 7 crore UCO bank fraud case: Delhi court convicts three, acquits bank official

A Delhi court has convicted three former directors of a textile company for cheating UCO Bank of Rs 7 crore in 2001 by submitting forged documents to obtain a loan that was later diverted. The court also underlined that the accused persons “cannot wriggle out of the criminal liability by conveniently arguing that they have entered into a settlement with the bank.”

Special Judge Sudhanshu Kaushik held Amit Chaturvedi, Sanjay Chaturvedi, and Parvin Juneja, ex-directors of Dwarkadhish Spinners Ltd (DSL), guilty of criminal conspiracy, cheating, and using forged documents as genuine.

The court, however, acquitted a former UCO Bank official, Bikash Basu, saying that the prosecution failed to prove his involvement in the conspiracy and that there was no evidence that he received any illegal gratification or acted with criminal intent. The case stems from a 2009 FIR by CBI, according to which the officials conspired to obtain a loan of Rs 7 crore from UCO Bank’s Parliament Street branch in 2001. Initially, they claimed the funds were for prepaying a loan from the Industrial Financial Corporation of India (IFCI).

After the loan was sanctioned, the directors misrepresented to the bank that IFCI had refused the prepayment. They persuaded the bank to convert the loan into a machinery-financing scheme under the government’s Technology Upgradation Fund Scheme (TUFS), the CBI said. It said that to secure the disbursal, the accused submitted a forged Chartered Accountant (CA) certificate and a fake invoice from a dummy firm to show they had purchased and installed new machinery.

The CBI probe revealed that no machinery was ever purchased, and the funds were siphoned off to the group’s associate companies, according to the FIR.

In a 160-page order pronounced on July 29, the court said, “There are circumstances to indicate that the criminal intention to cheat the bank was present since inception and the accused persons acted together to achieve the desired object of diverting the sanctioned funds.”

“There is astounding evidence to establish that accused persons cheated the bank and diverted the disbursed loan amount,” the court added.

It said there is evidence to conclude that all the accused persons entered into a criminal conspiracy to cheat UCO Bank to obtain a loan for financing the purchase of machinery under the TUFS by making a false representation that the sanctioned funds would be used for installing new machines.

“There is evidence to show that each one of the accused was fully aware of the steps involved in obtaining the loan as well as its disbursal and diversion of funds,” the court said.

On the defence’s argument that DSL entered into a ‘one-time settlement’ with the bank, the court said the case cannot be categorised as a simple matter where the borrower committed default in payment of the loan amount.

“It has been established that the accused persons deceived the bank and obtained the disbursal of the loan based on a fabricated CA certificate and a forged invoice. It has been established that the disbursed funds were intentionally diverted by the accused persons,” the court said.

It said the diversion of the loan carries civil as well as criminal consequences, more particularly, when the diversion is intentional and fraudulent.

“The accused persons did not use the funds for the purpose for which the same were disbursed, causing huge financial loss to the bank. They cannot wriggle out of the criminal liability by conveniently arguing that they have entered into a settlement with the bank,” the court said.

While acquitting the bank official, the court said it would be totally unjust to single out Basu and hold him responsible for the lapses when there is evidence to demonstrate that the recommendation made by him was evaluated by two other officials who were higher in rank.

The court will hear arguments on the quantum of punishment at a later date.