PMC Bank sanctions Rs 87 crore loan, releases Rs 0, dues balloon to Rs 150 crore

India Today

6 days ago

In what appears to be a textbook case of institutional failure and financial engineering gone wrong, a forensic audit has exposed a shocking gap between sanctioned credit and actual disbursement in a high-stakes case involving Punjab & Maharashtra Co-operative (PMC) Bank and a real estate entity.The audit reveals that PMC Bank formally approved loans amounting to Rs 87.5 crore for Prithvi Realtors and Hotels Pvt. Ltd., but no actual money ever left the bank's vaults. Yet, interest charges kept accruing over the years, pushing the so-called 'outstanding' to over Rs 150 crore.advertisementConducted by Deepak Singhania & Associates, Chartered Accountants, the audit was commissioned in the context of an ongoing arbitration dispute. The firm reviewed key financial records—loan approvals, mortgage documents, and account statements—all pointing to one disturbing reality: not a single rupee was transferred to the borrower's account after October 2012.
The original facility began as a Rs10 crore mortgage overdraft. It was subsequently ramped up to Rs 87.5 crore, allegedly secured against a 53,680 sq. m. plot in Vasai, Thane. But post-sanction, the trail goes cold. No debit entries. No fund movement. Just rising interest liabilities on an empty balance.The audit report strikes hard and says, 'There is no substantiation of disbursement. No transaction entries. No repayment history. What exists is interest on a non-existent principal.'The issue took a darker turn when an arbitration tribunal reviewing the same case described the situation as deliberate deception. The panel flagged instances of forged documents, impersonation, and wilful misrepresentation, categorising the case as 'premeditated financial fraud of serious magnitude.'Citing landmark Supreme Court judgments, the tribunal declared itself unfit to adjudicate, emphasising that fraud of this scale lies outside the scope of arbitration.Now, the matter has escalated to the National Company Law Tribunal (NCLT), where legal arguments are set to revolve around the enforceability of a liability created without a corresponding disbursement.Legal experts suggest that this case may become a benchmark for identifying synthetic debt traps—where sanctioned loans never materialise, yet borrowers are legally chased for repayment on paper-based obligations.At its core, the audit report exposes a dangerous financial loophole: a system where loans exist only in documentation, but the liability is real, enforceable, and crushing. And unless reined in, such mechanisms can destabilise the very foundation of responsible lending.- Ends