[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
http://www.rediff.com/money/2003/dec/01sbi.htm
State Bank of India has won a landmark judgement against the liquidators of the
defunct Bank of Credit and Commerce
International.
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
keeping.
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
profits."
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 $
45,497,000."
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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