Bankers have been jolted by the arrest of former SBI chairman Pratip Chaudhuri without any notice or summons in NPA case that was concluded only after he retired.

The police and judicial high handedness has shocked bankers who now fear that such crude actions by authorities will lead to delays in decision making and impact clean up of bank loan books. Bankers say arresting the former chief of the largest bank without any proper inquiry sends the wrong message and is detrimental to the system.

Former SBI chairman Rajnish Kumar called it extremely unfortunate and an extreme case of high handedness.

“Prima facie it seems to be a case of misrepresentation of facts and single out an individual who held a high position to seek publicity . In the process the dignity of an individual has not been given any consideration . It needs to be looked nto whether due process of law has been followed,” Kumar told ET.

Chaudhuri was arrested from his Delhi residence by the Rajasthan police and taken to Jaisalmer on Monday. His subsequent bail application was rejected by the magistrate officer.

The case refers to ‘Garh Rajwada’ hotel project in Jaisalmer, financed by State Bank of India (SBI) in 2007. Since the project was not completed for three years and a key promoter passed away in April 2010, the account slipped into an NPA in June 2010.

Since the bank’s recovery or revival efforts did not bear any fruit SBI sold the loans to Alchemist Asset Reconstruction Co (ARC) in March 2014.

Ironically bankers point out that Chaudhuri retired from the bank six months earlier in September 2013.

In a statement SBI said the sale to Alchemist ARC was done through a laid down process. Further, the account was taken to the bankruptcy court and was acquired by a non banking finance company in December 2017.

The arrest without any due notice or summons neither to the bank or to Chaudhuri has made current and former SBI executives very angry. Fomer SBI deputy managing director Sunil Srivastava took to Twitter to express his displeasure.

“Frankly, without notice and without summons, how can police from another state arrest someone in Delhi, where is the due process of law? Absolutely pathetic. Is the system being gamed again by defaulters despite all efforts by Modi govt, time for overhaul of judicial processes to improve transparency and introduce accountability,” Srivastava said.

To be sure, it is unclear whether Chadhuri was arrested because of his role as SBI chairman or because he was later chsirman of Alchemist ARC. Interestingly, Alchemist ARC promoter Alok Dhir was not arrested and had switched off his phone when ET tried to reach him.

“Whatever it is it does not have a logical or legal basis,” said the chief of a large public sector bank on the condition of anonymity. “There have been numerous court orders including from the Supreme Court that directors are not liable for the faults or crimes of a company management. Some lower level judicial and police officers who have no clue of how banking works take these high handed decisions to please higher ups. This must stop,” this CEO said.

SBI said despite the case involving its loan account, it was neither summoned nor asked for its side of the story.

“It transpires now that the borrower had initially filed an FIR with the state police against the sale of asset to ARC. Aggrieved against the negative closure report filed by police authorities, the borrower had filed a ‘protest petition’ before the Hon’ble CJM Court. Incidentally SBI was not made a party to this case. All the directors of that ARC including Mr. Chaudhuri, who joined their board in Oct. 2014, have been named in the said case. Incidentally, Mr. Chaudhuri retired from the Bank’s service in Sep. 2013,” SBI said.

The bank said it has now accessed copies of the proceedings which show that the court was not briefed correctly on the sequence of events.

“In as much as SBI was not a party to this case, there was no occasion for the views of SBI being heard as part of this proceedings. SBI would like to reiterate that all due process were followed while making the said sale to ARC. The Bank has already offered its cooperation to the Law Enforcement and Judicial authorities and will provide further information, if any that may be called for from their side,” SBI said.

Bankers said lessons have not been learnt despite recent judicial and police over reaches. They were referring to dramatic June 2018 arrest of

CEO, Ravindra Prabhakar Marathe, and executive director Rajendra Kumar Gupta. Police subequently filed a closure report due to lack of evidence and Marathe and Gupta were reinstated within the bank.

“The point is the police were not punished. There is no punishment for wrongful cases and judgements which can destroy careers. Law enforcement agencies are not acting with responsibilty and this will have economic repurcussions,” said the bank CEO quoted above.