18-year trial ends in conviction of company, director for cheating bank

Mumbai: In a trial that took 18 years to culminate, a magistrate’s court convicted Anushool Metals Pvt Ltd and its 65-year-old director for cheating Canara Bank in a fraud of about Rs 3.33 crore, holding that the company used forged financial statements and concealed prior encumbrances to obtain and enhance bank credit. The accused Bandra-based Bharathi Hegde was also fined Rs 4.5 lakh, while the company was fined Rs 3 lakh. During the sentencing, Additional Chief Judicial Magistrate Supriya V Nikam said that the accused was held guilty of a serious economic offence involving criminal conspiracy, cheating and forgery, which resulted in wrongful loss of Rs 3.33 crore to a public sector bank. “It is needless to mention that banks survive only on the hard-earned investments and deposits made by people at large, and any loss caused to the bank ultimately affects the public at large. Having regard to the totality of facts and circumstances, the gravity of the offence, the quantum of loss caused to the bank and the role played by the accused, a sentence of incarceration coupled with a fine would meet the ends of justice,” the magistrate said. Bharathi Hegde sought leniency grounds of her age, financial difficulties and the fact that she was still grieving the sudden death of her husband. She also claimed to be unaware of the company’s affairs. However, the magistrate held that the prosecution “unfolded a classic tale of corporate fraud, inflated numbers on paper, a property that was already pledged elsewhere, and documents that looked perfect on the surface but crumbled under scrutiny. The bank parted with crores, only to discover later that the security it relied upon was illusory and the financial health projected was, in large measure, make-believe.”Two other accused, Jayram Hegde and chartered accountant Iqbal Gour, died during the pending proceedings, and the case against them was abated. An advocate, Satish Bejal, was discharged earlier.CBI’s Economic Offences Branch investigated the case following a complaint lodged on Aug 18, 2008 by a Canara Bank official. According to the prosecution, the company run by directors Jayram Hegde and Bharathi Hegde, first obtained a cash credit facility from Canara Bank’s Mangalore branch by submitting two different sets of audited reports for the same financial years 2002-03 and 2003-04. It was further submitted that one set contained correct figures while another set carried inflated and false figures that made the firm appear financially stronger, leading the bank to disburse an initial loan of Rs 50 lakh that was later enhanced up to Rs 2 crore. After the account was shifted to Canara Bank’s Parel branch in Mumbai, the company sought an additional facility of Rs 58 lakh and offered a land in Panvel as collateral. It was found that the land was not free of encumbrance as represented and had already been attached in recovery proceedings by Janata Sahakari Bank Ltd, Pune, by an order dated Jan 31, 2005. It was alleged that this was suppressed while the property was presented to Canara Bank as fresh security.The prosecution examined bank officials and other witnesses to establish the loan processing trail, the reliance placed on the borrower’s financial statements, and the later discovery of defects in the collateral. The court cited evidence that Canara Bank relied on the borrower’s documents and professional reports while sanctioning limits, and later found that the property carried a prior charge and that hypothecated stock valued by the bank’s valuer at about Rs 1.83 crore was missing during subsequent verification.The court held that the prosecution proved criminal conspiracy and cheating, as well as forgery for the purpose of cheating and using forged documents as genuine.