Delhi High Court Asks Centre, RBI To Respond To Subramanian Swamy’s Plea For Probe Into Transfer Of Yes Bank’s Stressed Assets To JC Flowers ARC

The Delhi High Court on Friday asked Union of India, Reserve Bank of India (RBI) and Securities Exchange Board of India (SEBI) to respond to former Rajya Sabha MP Subramanian Swamy’s PIL seeking investigation by a committee of experts into the transfer of Yes Bank's stressed assets to J.C. Flowers Asset Reconstruction Company.

A division bench of Chief Justice Satish Chandra Sharma and Justice Subramonium Prasad also sought response of Yes Bank and the asset reconstruction company. However, no formal notice was issued in the matter today.

Senior Advocate Rajshekhar Rao along with Advocate Satya Sabharwal appeared for Swamy.

The PIL also seeks direction on Union of India, RBI and SEBI to formulate “proper and comprehensive guidelines” in accordance with recommendations of the committee of experts to check similar agreements or transactions in future.

The plea has been moved in the backdrop of transfer of a stress asset portfolio worth Rs. 48,000 crores from Yes Bank to J.C. Flowers Asset Reconstruction Company.

“This transfer is linked to another deal in which Respondent No.4 (Yes Bank) has obtained a stake of up to 19.9% in the company of Respondent No.5. (Asset Reconstruction Company),” the PIL states.

Swamy in the petition has submitted that there is a “growing rot” prevalent in private banking sector, which has been further accelerated by “perpetual decay” of corporate governance and ethical standards in private banking industry and asset reconstruction industry.

“This is growing case of concern as there is apparent conflict of interest between functioning of banks & ARCs. The situation is further complicated, when motivated and malafide transactions between the two are allowed to stand as the regulator (RBI), fails to act & enforce its own guidelines causing significant loss of public monies,” the petition states.

Submitting that Non-Performing Assets (NPAs) are a growing concern for private sector banks in India, Swamy has contended that poor credit risk management practices and insufficient internal controls have contributed to the high levels of NPAs in private sector banks.

“The transfer of a distressed asset portfolio worth Rs. 48,000 crores to Respondent No.5 (asset reconstruction company) through these transactions appears to be a blatant attempt to circumvent laws and regulations in favor of Respondent No.5. This not only undermines the trust of the public in the banking sector but also jeopardizes the economic stability of the country. It is alarming to see how Respondent No.4 (Yes Bank) is willing to sacrifice the recovery of public funds for the benefit of one company,” the PIL adds.

Title: DR. SUBRAMANIAN SWAMY v. UNION OF INDIA