'PMC Bank, Wadhawans didn't follow due process while mortgaging land'

The PMC bank is going to face legal hurdles as far as auctioning under SERFESAI ACT.

The Reserve Bank of India (RBI) appointed administrator for Punjab Maharashtra Cooperative (PMC) Bank has informed the RBI that Wadhawans and PMC bank have not followed the due process of documentation for the property mortgage with the bank. According to sources, the Rs 3,500 crore land parcel which was kept as mortgage will face several hurdles to auction, as per the SERFESAI Act. After auctioning all those properties the bank was supposed to recover the huge amount.

The RBI administrator said this during a meeting held between RBI, Economic Offences Wing and Enforcement Directorate on Thursday. According to sources, the PMC bank administrator JB Bhoria told RBI that the land parcels in Vasai, Virar, Nalasopara worth Rs 3,500 crore, which were kept as mortgage to PMC bank by Wadhawans, have several lacunas. During valuation, the RBI administrator saw that the documentation process of mortgage properties was not done as per the rules and there are several loop holes, which are going to be a hurdle to auction these properties inorder to recover the money. The plots, which were mortgaged to PMC bank, are believed to recover the over 90 percent of the amount. The total fraud which was initially Rs 4,355 crore reached over Rs 5,000 crore after the forensic report.

"Out of all those land parcels, only 5 to 10 percent were properly mortgaged to PMC bank," sources said.

The administrator has also informed the RBI that he will take a week more to understand the irregularities done while mortgaging the properties for the loan given to HDIL owned by Rakesh and Sarang Wadhawan. The PMC bank is going to face legal hurdles as far as auctioning under SERFESAI ACT.

The commissioner of Mumbai police told PMC depositors several times while meeting them that the SERFESAI act has empowered the bank to auction these properties, but the revelation by the administrator hints that the depositors will have to wait for several more months till all the properties auctioned.

However, HDIL in a statement earlier said the properties secured with the bank is estimated over Rs 7,000-8,000 crore. "For the valuation of all 40 properties secured with PMC bank, HDIL has hired a multinational company Knight Frank."

What is the SERFESAI Act

SARFAESI Act or Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, lets the banks as well as other financial institutions of India auction commercial or residential properties for the purpose of loan recovery. ARC, the first asset reconstruction company, was established under this act.

Catch up on all the latest Crime, National, International and Hatke news here. Also, download the new mid-day Android and iOS apps to get the latest updates