Bank Sues Retired Uncle Over Loan Defaults: How Can He Defend Himself?

My uncle retired from the bank a few years ago. Now, the bank has filed a case against him as he sanctioned some loans and the customer turned out to be a defaulter. How is my uncle liable for it? What actions can he take?

Has your uncle received a summons from the court or just the lawyer's notice? In what capacity did your uncle work at the bank? What was his designation? It appears that either of these has been sent out of malice towards your uncle, or someone wants to make him a scapegoat. If the court's summons have been received, then not much can be done. He has to hire a lawyer and defend his case. Now his lawyer needs to prove that the sanctioning of the loan was a misjudgment rather than willful negligence.

When he was transferred to the loan department or credit department, did he sign any kind of documents?

In every bank, the department that sanctions the loan is called the credit department or loan department. For assessing the creditworthiness of the applicant, the bank must have prepared some checklist or SOP. However, whether to give credit or not depends on judgment. Sometimes judgment can go wrong. However, how fair it is to hold an individual responsible remains to be seen! Secondly, was he the last person to scrutinize the loan application? What about the audit department? How did this non-creditworthiness escape their attention as well?

In western countries or the USA, the board of directors appoints an outsider as the Managing Director. Sometimes the decision proves disastrous. However, they are just sacked but not sued.

This is the tragedy of India. Persons like Vijay Mallya can default on payments of Rs 1,500 Crore and yet continue their swashbuckling ways or celebrate birthday bashes with fanfare, but a small employee or officer is sued.

Thanks,

Dinesh Divekar

Understanding Loan Sanction Responsibilities

What position did your friend hold at the bank? Loans are sanctioned by the bank following a due process. No single person can sanction a loan. The full facts of the loan sanction process will have to be examined, including what role your friend played.

Legal Steps to Consider

If a case has been filed, then you have no choice but to hire an advocate and defend your position in court. After how many years did the customer become a defaulter? What was the bank doing when the individual did not pay his installments on time?

How many years have elapsed since your uncle sanctioned the loan and the person became a defaulter?

Can you please clarify the following points:

1) What exactly is the charge?
2) Whether the charge is of civil nature or criminal nature.
3) Under what section of which Act?
4) How many of the retired or working employees have been made part of the charge sheet?

Thank you.

Checks and Balances in Loan Sanctioning

Sanctioning a loan by a bank is not an individual's decision; there are several checks and balances in place. Despite all precautions, things may go wrong for an enterprise due to environmental factors undergoing sudden changes. This can include physical, political, or market-related environments.

Just the other day, I was reading about how millions of dollars were invested in making an amusement park that was hit by a severe cyclonic storm (a rare occurrence in that area) on the very day of its inauguration and practically got washed away.

Consider the example of the pager industry, which was essentially killed off in its infancy due to the rapid development of mobile phones. Was it the fault of the managers who sanctioned the loan to a pager company?

Most importantly, will the bank share profits with your uncle for those loans that were sanctioned by him and are being regularly serviced by the debtors?

Any suggestion would depend on the present status of the investigation/proceedings. If the matter is still in the investigation stage and there is a real apprehension of being arrested, anticipatory bail could be sought. If the matter has already reached the court and summons have been issued, the charges need to be met/dealt on merits.

In my opinion, the retired bank officer can seek help to defend his actions on the following points, if applicable in his case:

(a) Whether the defaulter has paid any installments has not been disclosed. Presuming that the default occurred after the payment of some installments, if the defaulter paid many installments after the sanction of the loan and became a defaulter later, then the loan sanctioning authority is not responsible.

(b) Since the sanctioning officer has been retired for a few years (the exact number of years is not disclosed), the departmental action at this stage is time-barred. Help can be sought from the terms and conditions of employment, similar to the case of Central Government employees where it is stipulated that no departmental action can be taken against retired central government employees after a specified time without the approval of the Honorable President/Competent Authority.

(c) Departmental action has not been taken against any junior officers (if there are any) who investigated the case for the loan sanction and made recommendations for the sanction of the said loan to the retired officer.

(d) The loan was sanctioned strictly following the instructions of the bank as they existed at the time of sanctioning the loan. The retired officer must examine the instructions applicable at that time.

Further, my above points are based on presumptions, and in my opinion, everything will depend on the facts of the case and the charges leveled against the retired bank officer.

Dear Shri Harsh Kumar Mehta,

Your points are valid defenses. However, we are not aware of the circumstances and events that led to the loan being sanctioned and when it started deteriorating. Is it clear that only one person is being charged/sheeted, inquired into, or facing legal proceedings?

The statute of limitations could also be a strong technical defense. The poster needs to provide further details; currently, they have posted but not responded to many inquiries from knowledgeable members.

Sh. Nathrao ji, thank you for your remarks and appreciation as mentioned above. I have already expressed my views, and they can only be applicable depending on the facts of the case. In situations where the facts are unclear, we have no alternative but to present all possible views (or in this case, lines of defense) based on our experience and abilities.

The information given for bank filing a case is incomplete. Was there any investigation, if so, by whom? Was it an external agency? Generally, banks do not go to this extreme unless the irregularities are pinpointed and a conclusion is reached that a particular officer is responsible for the loss that a bank may incur. It is very essential to know the full facts of the case before coming to any conclusions.

It seems the querist is not aware of the background, nature of the case, and the present status of the case, as he has not replied to my questions for the last two days. Naturally, without the appropriate bare minimum information about the case, any answers from the members will just be streaming in the air, instead of providing any appropriate solutions.

Thank you, everyone, for helping out. The loan was against KCC (Kisaan Credit Card). The loan was approved in 2010, and my uncle retired in 2011. He has been charged along with the bank manager at that time, MRO, and other individuals. He was working as a field officer when the loan was sanctioned. The FIR was filed in 2015, and only then did my uncle learn that the man in whose name the loan was issued was deceased at the time of loan approval, and someone had fraudulently taken out the loan in his name. The documents were properly signed by the verifying lawyer and Patwari, making it difficult to discern during scrutiny. However, the lawyer and Patwari are not included in the FIR. Please advise on the clauses we can use to defend our case in court. He has been arrested under sections of the Indian Penal Code - 420/467/468/471. Any suggestions will be greatly appreciated to help us seek justice.

Bank Probing and Its Impact on Retiring Officers

It is ascertained that all banks are following this method of probing into the past. This method has created panic among the officers who are looking for voluntary retirement or for those who are about to retire in the coming years.

A possible solution is to look into the previous commitments that warrant any corrections. If the officer is on the right path, he has to clarify his role in the past transaction. I feel this is the correct path. If not, the retired officials will not get the full retirement benefits, and they are unnecessarily put into the trouble of meeting their higher-ups.

What was the role of your uncle? Did he process the papers under his signature? His role will be under total scrutiny because he is the starting point in the whole episode of issuing a credit card. IPC Section 467 deals with forgery, Section 468 deals with forgery for cheating, and Section 471 addresses the use of known forged documents as genuine. Your uncle needs to seek the help of a good criminal lawyer to resolve the issue. Everything you have mentioned indicates the necessity of proper legal advice to avoid trouble. Precisely, what was his role in getting a credit card issued in the name of a person who was deceased?