Non-bank lenders Reliance Home Finance & Reliance Commercial Finance have obtained interim stays against Punjab National Bank (PNB) & Bank of Baroda (BoB) from classifying the 2 companies as fraud accounts.

The High Court of Delhi passed the orders on 11 & 14 Aug. While the 11 Aug order pertains to PNB’s classification of the 2 companies as fraud, the 14 Aug rulings are in cases against Bank of Baroda. According to copies of the orders seen by Mint, the primary grouse of the 2 companies is that they were not given a hearing before the banks decided to proceed with the classification.

“Respondent No. 1 (PNB) will maintain status quo as of today (11 Aug) regarding the impugned order till the next date of hearing,” the court said. However, it clarified that PNB is free to issue a show-cause notice to the petitioners, give a hearing through video conferencing, & then pass an order as per the law.

It is also clarified that respondent number one (PNB) is free to take any step/investigation/file any complaint/proceedings against petitioner number one (both the companies) as per law independent of the aforesaid order declaring the account of petitioner number one as a fraud account,” it said.

Both Reliance Home Finance & Reliance Commercial Finance are petitioner one in their cases against PNB.

In the case against BoB, the HC said that “placing of the petitioner in the category of fraud shall be kept in abeyance till the next date. The respondent bank shall not take any steps prejudicial to the interest of the petitioners.”

Emailed queries to the Reliance Group, BoB & PNB remained unanswered.

In their plea against PNB, both non-bank lenders said that although the consortium of lenders met on 6 June, no notice was sent to them & even the minutes of the meeting were not provided. “On 28 July 2020, petitioner number one, it is stated, was shocked to learn from the queries raised by the media that respondent number one (PNB) has classified the account of petitioner number one as a fraud. It appears that respondent number one had informed the other banks of such classification,” said the HC order.

Mint reported on 4 Aug that PNB had classified its exposure to Reliance Home Finance as a fraud account. The total outstanding loans to the company as of 3 July 2019 stood at ₹7,109 crore.

Reliance Commercial Finance’s total borrowings, stood at ₹9,812.9 crore as of 31 March. 

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