Yes Bank's Rana Kapoor Not Solely Responsible For Sanctioning Loan: Mumbai Court While Granting Bail In ₹400 Crore Loan Fraud Case

A Special PMLA Court in Mumbai, while granting bail to Yes Bank co-founder Rana Kapoor in a 400-Crore loan fraud case, questioned the selective targeting of Rana Kapoor by the CBI, noting the omission of other officials who sanctioned the loan from the chargesheet.

Special Judge MG Deshpande observed that there is a common thread linking individuals involved in the criminal activity and the generation of proceeds of crime, and both the CBI Chargesheet and PMLA Complaints show that numerous associates and subordinates played pivotal roles in facilitating these transactions.

“While the Enforcement Directorate has appropriately included these individuals as accused persons in their Prosecution Complaints, the CBI has failed to do so, raising concerns about their selective targeting of the applicant. Furthermore, the reliance on statements from accused persons in the PMLA Special Case to oppose this bail application underscores the equal culpability of these individuals, yet they have been released while the applicant remains incarcerated. This discrepancy is exacerbated by the portrayal of the applicant as the sole perpetrator of the alleged offenses, disregarding the collaborative nature of the activities in question”, the court observed.

Kapoor is booked under sections 11, 12, 13(2), and 13(1)(d) of Prevention of Corruption Act and sections 120B and 420 of IPC. He has earlier been granted bail in the money laundering case arising out of the present loan fraud case. After getting bail in the present case, he was released from Taloja Central Prison on Friday after over 4 years in jail since his arrest in March 2020.

Prosecution's case

During March 2016 to January 2018, Kapoor, in collusion with Gautam Thapar, the Promoter of the Avantha Group of Companies, allegedly conspired to extend loans to AG entities, despite the group's deteriorating financial position. The prosecution contends that Kapoor, as MD and CEO of Yes Bank, abused his official position to incorrectly grant loans and acquire a property mortgaged by the bank for inadequate consideration.

In March 2016, AG was financially stressed with a cumulative outstanding of Rs. 1712.1 Crores. to Yes Bank. Yes Bank granted a loan of Rs. 400 Cr. to Avantha Reality Ltd (ARL) on March 29, 2016, which was used solely to repay existing loans of another AG company, Avantha Holdings Ltd (AHL), with ICICI Bank and DCB Bank.

The loan was granted against a Lease Rental Agreement for ARL's property at Amrita Shergill Marg, New Delhi. However, the prosecution alleges that the agreement was non-genuine as it was signed only a week prior to the sanction of the loan, reflected an inflated monthly rent, and was never honoured. The property was also allegedly undervalued, with discrepancies in its valuation by different entities.

Subsequently, the property was sold to Bliss Abode Pvt. Ltd (BAPL) for Rs. 378 Cr., a sale facilitated by Kapoor through BAPL, an entity in which his wife was interested. Kapoor allegedly failed to disclose conflicts of interest and deliberately abstained from giving approval for the sale, violating Yes Bank's Code of Conduct.

The prosecution further alleges that the sale proceeds were not fully utilized towards closing the loan and were instead distributed among other AG companies' loan accounts to prevent them from becoming non-performing assets (NPA). Loans granted to AG companies before and after the property purchase were allegedly not utilized for their stated purposes but were instead used for "Evergreening," including settling loan outstanding of Solaris.

Kapoor was not arrested in the present case. However, he had already been in custody in other cases against him. CBI sought his custody remand in the present case by producing him under Sec. 267 CrPC by transferring him from another crime. He sought bail contending that no prima facie case had been established against him and that he was unjustly implicated in the FIR and chargesheet.

Verdict

The court highlighted that Kapoor had spent over two years and seven months in judicial custody, with no trial commencement in sight, warranting his release on bail.

On merits, the court highlighted that the Credit Policy of Yes Bank provides for collective decision-making process of the Management Credit Committee (MCC), comprising of 22 persons. It emphasized that Kapoor, as the Chairman of the MCC, did not possess unilateral approval authority, and loan approvals required consensus among committee members.

Moreover, the court noted that the loan in question was repaid with interest, and Yes Bank issued a No Dues Certificate, indicating no significant loss sustained, contrary to the CBI chargesheet.

Regarding the allegation of collateral property being undervalued, the court highlighted that market conditions are constantly fluctuating, and there was a decline in property values in 2016 due to demonetization. It held that difference in valuation reports dated May 08, 2014 and August 04, 2015, is justifiable. “Generally, it is improbable that the market value of a property remains unchanged over a 15-month period”, the court pointed out.

Further, from the evidence, the court opined that prima-facie, Kapoor not only made the disclosure regarding his wife's role in BAPL but also that the MCC and the high-ranking officials of Yes Bank were satisfied with the deal.

With these observations, the court granted him bail. 

Senior Advocate Aabad Ponda along with Advocates Rahul Agarwal, Siya Choudhary, Jasmin Purani, Sajid Sayed and Shruti Adde represented Kapoor.

Special Public Prosecutor PBK Gaikwad represented the state.

Case no. – CBI Spl. Case No. 1233 of 2021

Case Title – Rana Raj Kapoor v. Central Bureau of Investigation