Tuesday March 21, 2023

17 accused get bail in Rs54bn bank loan fraud case

March 17, 2023

The Sindh High Court (SHC) has granted bail to 17 National Bank of Pakistan (NBP) and Hascol Petroleum Limited (HPL) officials in the Rs54 billion bank loan fraud case. The Federal Investigation Agency (FIA) had booked NBP and HPL officials on fraud, criminal breach of trust and money laundering charges.

The FIA claimed that NBP and HPL officials had committed financial fraud in the form of bank loans, and funded and non-funded financial facilities in violation of the banking laws, causing wrongful loss to the national exchequer of Rs54 billion and gain to HPL.

According to the prosecution, the applicants were involved in the bank scam amounting to Rs54 billion, which was extended to HPL as loan from 2015 to 2020 by at least 22 banks as financial facilities. The FIA accused the applicants of embezzlement by committing deliberate default in repaying the banks.

The applicants’ counsel said the FIA had no jurisdiction to investigate the matter in view of Section 20 of the Financial Institution (Recovery of Finances) Ordinance, 2001, and Section 84 of the Banking Companies Ordinance, 1962, as this was a case of restructuring of loan. They said the investigation report shows that from 2014 to 2017, HPL was regularly paying off the loans with markup satisfactorily, and in return receiving enhanced loans, so the default, if any, was not deliberate but the result of force majeure.

In any case, they added, negotiation between the banks and HPL for restructuring the loans was under way, and hopefully, an agreement would be reached sooner rather than later. They also said that the offence with which their clients had been charged did not fall within the prohibitory clause of Section 497(i) of the Criminal Procedure Code (CrPC), and in such cases bail was the rule and refusal was the exception.

They added that there was a delay in the registration of the FIR that had not been explained, and although the final charge sheet was submitted on July 19, 2022, the charge was yet to be framed against the applicants.

The assistant attorney general and the investigating officer opposed granting bail to the applicants. An SHC division bench comprising Justice Mohammad Iqbal Kalhoro and Adnanul Karim Memon said the FIR somehow showed that 30 people had initially been booked as accused in the alleged offence.

The bench said that on March 6, through a supplementary challan, six more accused had been let off by the IO, leaving 16 accused out of the 32 accused earlier recommended for trial by the prosecution.

The court said the IO was still unsure about how many accused he might let off, since, according to his statement, it mainly depends upon the discovery of fresh material in favour of the accused.

The court said the IO had also confirmed that for the time being, the investigation was over and the accused had fully cooperated with him in the investigation. The bench said that it was claimed that different commercial banks in connivance with the HPL management had extended various funded and non-funded financial facilities without obtaining tangible securities from HPL, then allowed their restructuring, i.e. conversion of short-term facilities into long-term facilities and securing those long-term facilities against fixed assets.

The court said the banks failed to analyse the price and foreign exchange risks while granting credit facilities to HPL in letter of credits (LCs) beyond the cash conversion cycle of the customer as well as the industry, granting trade facilities in excess of the genuine working capital requirement of HPL.

The bench said the banks further failed to compare HPL’s actual local purchases with inland LCs opened by the banks on behalf of HPL in favour of Byco, diluting security structure and thus mala fide, causing wrongful gain and loss to the banks. It said that prima facie either no evidence or very scanty evidence had been collected by the prosecution to show that the accused had earned material gain out of it.

The bench said that the entire case of the prosecution was based on documentary evidence that the prosecution had already collected and submitted in the trial court through the final and supplementary charge sheets.

The court said that there was no apprehension of the documentary evidence being tampered with by the applicants if they were to be released on bail.

The court said one of the presidents of the bank, who had been assigned a specific role in the FIR and in the final charge sheet, had been exonerated by means of the supplementary charge sheet. When the bench asked the IO to explain his release, he said the accused had informed him that he had acted on the note sheets prepared and sent to him by his subordinates. The court said the IO surprisingly found a reasonable justification to let him off the charges.

The bench said the IO could not satisfy the court that the responsibility of the exonerated accused as lessor was somehow different than the liability of the accused who had been sent up by him for trial. The court said the IO had categorically expressed that he did not require the custody of the applicants because he had already concluded the investigation in which the applicants had fully cooperated with him.

The bench said that although the federal law officer opposed granting bail to the applicants, he could not deny the factual position that all the offences the applicants had been charged with did not fall within the prohibitory clause of Section 497(i) of the CrPC.

When the bench asked the IO why the applicants should be allowed to rot in jail, he could not think of an answer. He pleaded that a reasonable surety be imposed upon each of the accused.

The court granted bail to the applicants with a surety of Rs1 million each, directing them to submit their passports to the Nazir. The bench also confirmed the interim pre-arrest bail of one applicant with the same conditions.