Srinagar: The High Court of Jammu & Kashmir and Ladakh has declined to quash criminal proceedings in an alleged multi-crore J&K Bank loan scam, holding that the material collected during the investigation discloses a prima facie case that warrants a full-fledged trial.
The petitions were filed by the promoters of Aman Hospitality Pvt. Ltd. (AHPL), including Raj Singh Gehlot, Sheela Gehlot, Madhu Bakshi and Mohan Singh, along with four associated companies.
The case also names several former senior J&K Bank officials, including former Chairman Mushtaq Ahmad, former Finance Minister and J&K Bank Chairman Haseeb Drabu, former Presidents Parvez Ahmad Nengroo and Abdul Majid Mir, former Ansal Plaza Branch Head Rakesh Kumar Kharyal and former Loan Manager Kuldeep Kumar Gupta. Investigating agencies have alleged that they facilitated the sanction of loans, restructuring of the borrower’s account and approval of a controversial One-Time Settlement (OTS). All the accused have denied the allegations.
Dismissing the batch of petitions, Justice Sanjay Dhar observed that while exercising powers under Section 482 of the Code of Criminal Procedure (CrPC), the High Court cannot examine the truthfulness of the prosecution’s allegations or assess the defence evidence. The court held that such issues can only be determined during trial.
The case stems from an FIR initially registered by the Anti-Corruption Bureau (ACB), Srinagar, which was later transferred to the Central Bureau of Investigation (CBI), Bank Securities and Fraud Branch, New Delhi, for further investigation.
According to the investigation, J&K Bank’s Ansal Plaza Branch in New Delhi sanctioned loans amounting to ₹227 crore, along with a bank guarantee limit of ₹15 crore, to AHPL for the construction of a twin five-star hotel project at Shahdara, Delhi.
Investigators stated that the project was initially estimated at ₹866.89 crore and was later revised to ₹1,275.71 crore. Raj Singh Gehlot, Managing Director of AHPL, also furnished a personal guarantee of ₹41.01 crore.
The investigating agencies have alleged that AHPL later defaulted on loan repayments. According to the investigation, the account was restructured in December 2014 with a funded interest term loan of ₹165.82 crore sanctioned by the lending consortium, including ₹47.21 crore by J&K Bank.
The account was subsequently classified as a Non-Performing Asset (NPA) on June 30, 2018. Investigators stated that by then J&K Bank’s total exposure had risen to ₹289.28 crore, including principal dues of ₹261.47 crore and accrued interest.
The charge sheets further allege that loan funds were diverted through a network of companies allegedly controlled by Raj Singh Gehlot, including Ambience Pvt. Ltd., Raj Commercial and Agencies Ltd. and NGR Consultant Pvt. Ltd.
Investigating agencies have also alleged that after the account became an NPA, senior bank officials approved an OTS under which J&K Bank agreed to settle its dues for ₹128.94 crore. According to the prosecution, this conferred an undue pecuniary benefit of ₹160.34 crore on the borrowers without first exhausting recovery proceedings under the SARFAESI Act or initiating proceedings before the National Company Law Tribunal (NCLT).
The accused have denied all allegations. They have contended that the loan funds were utilised for the hotel project, that there was no diversion or siphoning of funds, and that forensic audits did not establish fraud or criminal misconduct.
In its judgment, the High Court clarified that it was not adjudicating upon the guilt or innocence of the accused. Justice Dhar observed that disputed questions relating to the alleged diversion of funds, criminal conspiracy, abuse of official position and the role of the bank officials can only be determined after evidence is recorded during trial.
Holding that the investigating agencies had placed sufficient material on record to justify continuation of the prosecution, the High Court declined to interfere with the charge sheets, allowing the criminal trial to proceed.
