Shiv Kala fraud: RBI, NHB tightlipped

Fi­nan­cial in­sti­tu­tions yet to take ac­tion against their of­fi­cials in a case of mul­ti­ple fi­nance fraud

HT Estates - - FRONT PAGE - Jee­van Prakash Sharma

Reg­u­la­tors of fi­nan­cial in­sti­tu­tions in In­dia – the Re­serve Bank of In­dia ( RBI) and the Na­tional Hous­ing Bank (NHB) – seem to be com­pletely obliv­i­ous of the plight of the 400 home­buy­ers who were de­frauded by a builder in a case of multi-fi­nanc­ing of apart­ments in a Greater Noida hous­ing project three years ago.

Hin­dus­tan Times, on Novem­ber 18, 2013, had ex­posed the hous­ing scam in which a de­vel­oper, Mahim Mit­tal, al­legedly col­lud­ing with of­fi­cials of banks and hous­ing f i nance com­pa­nies, sold apart­ments of a real es­tate project, Shiv Kala Charms, to mul­ti­ple buy­ers, and banks ex­tended home loans to three to four par­ties for one apart­ment.

In ques­tion are the dili­gence pro­cesses of banks such as HDFC, Axis, Ori­en­tal Bank of Com­merce along with hous­ing fi­nance com­pa­nies such as LIC Hous­ing Fi­nance Limited, De­wan Hous­ing Fi­nance Cor­po­ra­tion Limited, Pun­jab Na­tional Bank Hous­ing Fi­nance and In­di­a­b­ulls.

The NHB, in a pre­lim­i­nary probe, had said the main rea­son for the scam was prob­a­bly the lack of proper due dili­gence by the hous­ing fi­nance com­pa­nies (HFCs) con­cerned, while ap­prov­ing the cap­tioned project/ sanc­tion­ing the loan to the in­di­vid­ual bor­rower.

The HFCs had been asked to apprise NHB of the ac­tion taken against the of­fi­cials in­volved. “More than two years have gone by, no ac­tion has been taken against the of­fi­cials of any hous­ing fi­nance com­pa­nies. When we talk to the of­fi­cials of NHB, they say that since the mat­ter is be­ing in­ves­ti­gated by the Eco­nomic Of­fences Wing of the Delhi Po­lice, they will not com­ment on the is­sue,” says Ravi Srivastava, a home­buyer in the Shiv Kala project.

When con­tacted, the chair­man and man­ag­ing direc­tor of NHB, R V Verma, re­fused to com­ment. RBI, too, has main­tained a stud­ied si­lence over the is­sue. De­spite re­peated emails from HT Es­tates to the RBI ask­ing for in­for­ma­tion on any dis­ci­plinary ac­tion taken against the bank of­fi­cials in­volved, the apex bank, apart from ac­knowl­edg­ing re­ceipt of mails, did not re­spond to the queries.

Se­nior banker Bhaskar Niyogi says that in such cases buy­ers get pro­tec­tion but only when it is proved in a court of law that a bank of­fi­cial is work­ing hand in glove with the de­vel­oper or where the project has been ap­proved by the bank.

“Banks do have a well laid down ma­chin­ery to do in­ves­ti­ga­tion and carry the same to its log­i­cal con­clu­sion. This is one of the rea­sons why pub­lic sec­tor banks have the pol­icy of job ro­ta­tion once in ev­ery three to five years as a preven­tive mea­sure against for­ma­tion of vested in­ter­ests. Re­gard­ing re­cov­ery of loans, banks will al­ways pro­ceed against the bor­rower as per the loan doc­u­ments. Only in cases where the un­der­ly­ing transac- tion is fraud­u­lent and hence void, will pro­tec­tion be avail­able to the bor­rower. Even then, the bor­rower will find it dif­fi­cult to dis­prove his ig­no­rance as by law ig­no­rance can­not be a de­fence,” says Niyogi.

Bank­ing ex­perts say that prob­lem of multi- fi­nanc­ing has min­imised af­ter the for­ma­tion of a cen­tral reg­istry. “In

March 2011, the gov­ern­ment formed a cen­tral reg­istry which keeps the data of all the dwelling units mort­gaged to var­i­ous banks and fi­nan­cial in­sti­tu­tions. Banks can cross-check the sta­tus of a prop­erty from the cen­tral reg­istry web­site. This has taken care of the prob­lem of multi-fi­nanc­ing which used to be a se­ri­ous is­sue,” says a se­nior NHB of­fi­cial. He adds, “How­ever, both RBI and NHB must com­pel the fi­nan­cial in­sti­tu­tions to take ac­tion against the of­fi­cials in­volved.”

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