Kashmir Impulse Desk

Srinagar, July 1

The High Court of Jammu and Kashmir and Ladakh has refused to quash chargesheets filed in the alleged Rs 227-crore J&K Bank loan fraud case involving Aman Hospitality Pvt Ltd (AHPL) and its promoters, holding that the material collected during the investigation disclosed a prima facie case requiring a full-fledged criminal trial.

In a significant ruling, Justice Sanjay Dhar dismissed a batch of petitions challenging the prosecution, observing that the court, while exercising its inherent jurisdiction under Section 482 of the Code of Criminal Procedure, could not undertake a detailed examination of evidence or assess the merits of rival claims at the pre-trial stage.

The petitions related to chargesheets arising from FIR No. 15/2019 registered by the Anti-Corruption Bureau (ACB) and a subsequent investigation by the Central Bureau of Investigation (CBI) into loans sanctioned by J&K Bank’s Ansal Plaza branch in New Delhi for the construction of a five-star hotel project at Shahdara in the national capital.

According to the investigation, AHPL obtained credit facilities amounting to Rs 227 crore from the bank, in addition to a bank guarantee facility of Rs 15 crore.

The probe found that the bank had initially sanctioned a term loan of Rs 100 crore along with a Rs 5-crore bank guarantee in August 2009. The company subsequently secured a second term loan of Rs 50 crore in October 2011, a third term loan of Rs 77 crore in January 2012 and a funded interest term loan (FITL) of Rs 47.21 crore in December 2014.

Following an investigation into the first disbursement of Rs 35 crore from the initial loan, the Anti-Corruption Bureau filed a chargesheet alleging offences including criminal conspiracy, criminal breach of trust and cheating under the erstwhile Ranbir Penal Code, along with provisions of the Jammu and Kashmir Prevention of Corruption Act.

Among those named as accused were AHPL promoters Raj Singh Gehlot, Mohan Singh, Sheela Gehlot and Madhu Bakshi, besides Aman Hospitality Pvt Ltd, Ambiance Pvt Ltd, NGR Consultants Pvt Ltd, Raj Commercial and Agencies, and former J&K Bank officials Rakesh Kumar Kharyal, then branch head at Ansal Plaza, and former loan manager Kuldeep Kumar Gupta.

In June 2021, the Jammu and Kashmir government transferred the investigation to the Central Bureau of Investigation, which registered a fresh case, carried out further investigation and subsequently filed a supplementary chargesheet before the Special Court.

The petitioners argued before the High Court that the prosecution was unsustainable because there was neither any criminal conspiracy nor diversion of loan funds.

They contended that the transactions in question merely reimbursed expenses already incurred by the project’s turnkey contractor, that the hotel project had eventually been completed and that forensic audits had not established any financial fraud.

The court, however, declined to accept these arguments at the preliminary stage, observing that the terms governing the sanction of the loans specifically required the funds to be utilised exclusively for the implementation of the hotel project.

Justice Dhar noted that the investigation had revealed that substantial amounts from the designated loan account were allegedly transferred to several entities stated to be under the control of the principal accused, raising questions regarding the utilisation of public funds.

The court observed that while the completion of the hotel project and the company’s prior investment in the venture were undisputed, those circumstances by themselves did not negate allegations of cheating or fraudulent diversion of loan proceeds.

“It is true that the project has ultimately been completed and the hotel is in existence and it is also a fact that the petitioner company had invested a huge amount before obtaining loan from the lending banks, including J&K Bank Limited, but that by itself would not mean that it is not a case of cheating,” the court said.

The judge further observed that had the dispute merely involved repayment obligations or acceptance of a one-time settlement without evidence of dishonest intention at the inception of the transaction, the matter could have remained within the realm of civil law.

However, the investigation, the court noted, prima facie suggested that portions of the loan amount had been diverted and siphoned off for purposes unrelated to those for which the credit facilities had originally been sanctioned.

“Misutilisation of funds coupled with diversion and siphoning of funds by the borrower company, prima facie, establishes the allegation relating to fraudulent procurement and utilisation of the loan amount,” the court observed while dismissing the petitions.

The ruling clears the way for trial proceedings to continue before the designated Special Court, where the prosecution and defence will have the opportunity to lead evidence on the allegations arising from one of the Union Territory’s highest-value bank fraud investigations.