[sbinews] SBI wins case in London (Rediff. com Site)

  • From: Rajendra S.Pai <rajendra.pai@xxxxxxxxx>
  • To: sbinews@xxxxxxxxxxxxx
  • Date: Mon, 1 Dec 2003 18:40:58 +0530

SBI wins case in London
Shyam Bhatia in London | December 01, 2003 16:55 IST

State Bank of India has won a landmark judgement against the liquidators of the 
defunct Bank of Credit and Commerce 
The judgement means that the London branch of SBI will not be liable for any of 
the $10 billion debts incurred by BCCI prior to 
its closure in 1991, resulting in one million small depositors around the world 
losing their deposits.
Larger depositors who also lost their money included government organisations 
and government investment funds from many 
countries around the world.
In his landmark judgement, reinforced by last week's appeal ruling, Justice 
Patten ruled that SBI was completely innocent of 
participating in fraudulent money raising schemes devised by BCCI managers.
BCCI, managed by Pakistanis and funded by Gulf sheikhs, was a prime bank in 
1983. When it ran into trouble because of 
unsecured loans to VIP customers and losses incurred in silver trading, it 
tried to balance its books through questionable book 
In the words of Justice Patten, "BCCI embarked on a systematic and wide-scale 
fraud involving the manipulation of account 
balances, with the twin objectives of concealing losses and boosting apparent 
He added, "As a result of the fraudulent practises...the audited accounts of 
BCCI Overseas for the year ended 31 December 
1983 showed pre tax profits of $136,340,000. The accounts should have actually 
shown a loss before tax of at least $ 
The BCCI strategy was to raise loans for shell companies and then use the money 
to credit its loss accounts. SBI was one of 
four Indian banks in London that was tapped by BCCI.
When BCCI crashed in 1993, its liquidators sought the co-operation of all 
financial institutions with whom it had links.
They were all asked to contribute to a compensation pot of $ 11 billion.
When SBI refused to comply, arguing it was innocent of any wrong doing, it was 
taken to court by BCCI's liquidators.
Justice Patten's judgement has now vindicated the bank's stand and saved 
shareholders, including the Reserve Bank of India, an 
estimated $125 million.
Other Indian banks who also loaned money to BCCI are also expected to benefit 
from SBI's victory.

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