After a series of exclusive stories published by Indiatoday.

in in the month of February 2015

against the Bank of Maharashtra and Surat-based fleet operator Siddhi Vinayak Logistics Ltd
(SVLL), the nationalised bank decided to take action.

The bank has issued an order of suspension against three senior officials who were involved in
sanctioning a loan worth Rs 600-700 crore to SVLL, violating banking guidelines.

These three suspended bank officials are:

1) P N Deshpande, General Manager with present portfolio of Resource Planning, Government

Business, Marketing & Publicity, ABC, CPIO and SLBC.

2) Rajesh M Jain, Assistant General Manager, Asset Recovery Branch, Kolkata.

3) A M Menon, Assistant General Manager at Amravati Branch, Maharashtra.

The order issued to Rajesh Jain by the HR Dept of the Bank of Maharashtra says, "Mr Rajesh
Jain (PF No. 14250), AGM, Asset Recovery Branch, Kolkata is reported to have committed
certain acts, as stated below, which prima facie are in violation of procedure and guidelines and
are also detrimental to the interest of the Bank."

"His above alleged irregularities if proved, are acts of misconducts as per Bank of Maharashtra
Officer Employees' (Conduct) Regulations , 1976. Pending detailed enquiry in all the accounts,
Rajesh Jain is placed under suspension with immediate effect, " the Bank's order says.

However, Jain is entitled to a subsistence allowance as per guidelines. The subsistence allowance
shall, however, be paid on production of requisite certification that he is not engaged in any other
employment, business, professional or vocation.

The Bank has passed similar suspension orders against two other officials: General Manager P N
Deshpande and Assistant General Manager Mr Menon. All three officials would remain under
suspension till the Bank concludes its internal investigation in the Rs 600-700 crore loan-turning-
NAP case.

On February 2, 2015, Indiatoday.in had published an exclusive online story "Bank of

Maharashtra's major defaulter is a Surat fleet operator", exposing how one of the India's leading
fleet operator SVLL, which claims to be one of the fastest growing road transportation company
with branches all over India and fleet strength of 5,875 pre-owned vehicles - has turned into the
Bank of Maharashtra's biggest defaulter.

The article exposed how the senior officials and the management of the bank were quite aware of
the present status of the SVLL portfolio.

On February 13, 2015, Bank of Maharashtra had its board meeting to discuss its financial
position for year 2014-15, in which a major agenda was to take a crucial decision on SVLL
portfolio.

A forensic audit and legal action was also proposed by the bank officials in the board meeting
against SVLL. Moreover, "staff accountability is also being examined separately and necessary
action will be taken against the staff concerned" was proposed.

Background

In 2012, SVLL launched its corporate responsibility scheme called "Chalak Se Malak" to help
drivers (by making them equity shareholders). In the same year, SVLL captured headlines by
placing its largest order to Tata Motors of 1,314 M and HCV trucks. The value of the order was
estimated to be around Rs 225 crore. Under the Chalak Se Malak scheme, SVLL took crores of
rupees as loan from the Bank of Maharashtra.

The portfolio documents with the Bank of Maharashtra dated December 31, 2012 points out "to
reward the loyalty of hundreds of truck drivers employed with SVLL under this scheme, the
company would sell its used trucks to the drivers at mutually agreed fair prices based on
valuation. Later, the driver will operate the truck as his own, but continues to have it deployed
with SVLL as a subcontractor. Out of the bills payable to the driver-cum-owner, SVLL will
deduct the installments on account of price of the truck. On full payment, the truck would be
transferred in the name of the driver. During the period of such payment, the loans availed by the
company (SVLL) from various lenders would continue."

After due discussion, the bank formulated a pattern on the lines of the scheme for financing
Small Road Transport Operator (SRTOs) and issued loans worth crores of rupees with various
concessions, such as a concession of 0.5 per cent in the processing fee, deviation in age limit of
the truck to be considered on a case-to-case basis and the margin to be kept as under 30 per cent
for trucks aged less than four years, 35 per cent for trucks aged four years and 40 per cent for
trucks aged five years.

The bank officials assured it's management that all advances will be classified under priority
sector (about Rs 100 crore), all advances will be covered under CGTMSE, and around 20 per
cent of the advances may be classified under weaker sector and assured repayment through
SVLL linkage. But nothing as such happened. In 2015, bank officials are still struggling to get
their money back from SVLL.

The Pune branches of the Bank of Maharashtra played a major role. Specifically, one indirect
term loan to drivers was given from Model Colony Branch, Pune, to 500 accounts of Rs.100
crore, and another indirect term loan to various drivers was given from Deccan Gymkhana, Pune,
to 2,375 accounts of Rs 652 crore.

Documents available with Indiatoday.in shows that by May 2014, Bank of Maharashtra had
direct exposure to the group companies of SVLL of Rs 259 crore, and its indirect exposure to the
group by way of above SRTO finances were Rs 645 crore.
The complete investigation report would be handed over to the Reserve Bank of India and a few
other agencies after a few months.

But the question remains, how would Bank of Maharashtra recover the loan amount from a
willful defaulter SVLL - which claims to have a strong political backup in Gujarat.
n February 2, 2015, Indiatoday.in had published an online story "Bank of Maharashtra's major
defaulter is a Surat fleet operator", exposing how India's one of the leading fleet operator Siddhi
Vinayak Logistics Ltd (SVLL) - who claims to be one of the fastest growing road transportation
company with branch network all over India with fleet strength of 5,875 pre-owned vehicles -
has turned into Bank of Maharashtra (BoM)'s biggest defaulter till today.

The senior officials and the management of BoM were aware of the present status of this
portfolio but till this story was published in Indiatoday.in, did not bothered to declared it as a
NPA. In fact, Indiatoday exposed how a nexus within the bank was working to finance the
company's Chalak se Malak scheme upto Rs 658 crore - without any strong recovery plan.

Not only that, avoidance of marking NPA of these accounts was being done with an intension to
keep these accounts out of preview of investigation for specific period of time and avoiding legal
action by the bank. "But now, after matter coming in the public domain, RBI officials has taken it
seriously and has sought details from BoM. In addition, SVLL case has been referred to the
Central Bureau of Investigation (CBI) by few insiders," source said.

On February 13, 2015, BoM had its board meeting to discuss its financial position for year 2014-
15. One of the agenda was to take crucial decision on SVLL portfolio.

Source told Indiatoday.in, "In the end of board meeting, SVLL account was shown as NPA, but
only as of 31.12.2014. Moreover, 25 per cent provision is made, whereas all the directors were
demanding 100 per cent provision on Rs 658 crore NPA as there is no collateral security
available."

"What is important is that M/s Bhalla & Co (auditors) have admitted that it is the largest fraud in
BoM and considering loans from other dozen banks as well, it is a biggest scam. My concern is -
the chairman and managing director Sushil Muhnot is protecting whom? Politicians at Delhi?
Borrowers from Surat? Or his predecessors in BoM and half dozen corrupt top executives who
doled out huge loans without documentation and allowed borrower and politicians to loot from
November 2012 to December 2014," source told Indiatoday.in.

It is important to note that till February 9, 2015 - there was no action plan by BoM against SVLL
in terms of legal action and otherwise. But just four days before the board meeting in Pune, an
action plan was prepared and kept before the board members.

Indiatoday.in possess the 22-pages confidential internal report (dated 9/2/2015), exclusively in
hand - prepared by the credit monitoring department of BoM with present status on SVLL
account and its group companies. Remark made by the senior official on its front page itself says,
"the details of the investigation carried out by the vigilance department & inspection department
or also the media reports" would be one of the agenda to be discussed in the board meeting.
What action plan has been proposed by BoM officials in the board meeting against SVLL, before
that - it is important to know how many banks have financed SVLL and how much?

As per this report - position of term loan accounts with all banks as on July 7, 2014 is Rs 1987
crore (total sanctioned) and Rs 1465 crore (balance) with principal overdue of Rs 48.56 crore and
interest overdue of Rs 30.42 crore.

Banks which has exposure (balance amount) in SVLL are: Allahabad Bank (Rs 113.43 cr), Bank
of Baroda (Rs 223.36 cr), Oriental Bank of Commerce (284.84 cr), State Bank of India (Rs
188.72 cr), State Bank of Travancore (Rs 14.37 cr), Andhra Bank (Rs 89.07 cr), Corporation
Bank (Rs 84.81 cr), Union Bank of India (82.11 cr), SIDBI (30.53 cr), Bank of India (91.18 cr),
Punjab National Bank (69.63 cr), Indian Overseas Bank (47.84 cr) and Bank of Maharashtra (Rs
145.97 cr) - totalling Rs 1465 crore.

The major irregularities lies in SVLL's Chalak se Malak scheme - where BoM itself has an
exposure of Rs 658 crore against 2360 trucks with overdue principle of Rs 49.96 crore and
interest reversal of Rs 38.51 crore.

So what has been proposed by BoM before its board members?

-- BoM has not approved the restructuring package of SVLL to build pressure on the company to
clear the dues/transfer trucks in the names of drivers under this scheme.

-- BoM has proposed to have a forensic audit conducted by a reputed auditor for both SVLL and
the Chalak se Malak scheme to establish the fund utilisation.

-- BoM proposed to engage the services of a reputed recovery agent having experience in
recovery and repossession of vehicles as is done by banks and NBFCs, apart from legal action
against SVLL and other agencies which have received disbursements from the Bank.

-- Further if these vehicles are once again financed by any other agency, BoM's charge will
continue to be recognised and vehicle has to be the first registered in BoM's favour.

-- the shortfall remaining after the legal and recovery actions will be claimed from CGTMSE to
the extent of 75 per cent of loss from April 2015 onwards after expiry of lock-in period.

The concluding submissions by the credit monitoring department to the board members were:

--the Bank will take full legal action on all possible fronts to expedite the recovery of dues
including engagement of recovery agents.

-- Necessary information is being submitted to RBI as desired by them.

-- the Bank will make a loss claim to CGTMSE on expiry of the mandatory lock in period ie.
April 2015
-- Staff accountability is also being examined separately and accordingly necessary action will be
taken against the staff concerned.

and

-- regular status notes/updates will be reported to the Board at every board meeting.

What are SVLL's replies to BoM?

As per this internal report, SVLL has informed the Bank that is valuation was over Rs 6000 crore
and it was trying to raise funds by stake sale or by raising corporate loans by pledging its shares
to meet the above requirement. The company has also requested to cooperate in the matter and
not to initiate any action which would damage the reputation of the company and would affect
the livelihood of about 9000 families.

SVLL has stated that it expects to

-- receive disbursement from certain banks - amount release of cash collaterals by the banks after
approval of the restructuring package. This money shall be utilised for clearing these dues.

-- sell majority stake (51 per cent) in the company to a large industrial group for over Rs 500
crore and the advance there from would be used both for SVLL and for clearing Chalak se Malak
dues.

and

-- sign a large business deal with Posco Ltd to ply 2500 trucks for them and would get a sizable
advance for the same which will be used for clearing the over dues.

Earlier, the observation made in one of its another internal probe said, "The huge exposure taken
by the zonal authorities were without express consent by Head Office, violating its own credit
policy about the exposure to the group defined under credit policy approved by the board. In fact,
the finance were made without considering the basic principles of lending, flouting RBI
guidelines and credit policy of the bank."

Sources say SVLL submitted bogus applications of drivers to avail such loans. One of the
confidential communication between BoM's Ring Road Branch in Surat to Ahmedabad Zonal
Manager dated March 26, 2014, has exposed the fraudulent face of SVLL. This communication
copy is also with IndiaToday.in. Thereafter, the bank, pending investigation, did not sanction /
disburse any money under the chalak se malak scheme.

Does SVLL has political connection?

Sources within BoM told IndiaToday.in that "whenever bank officials communicated or met with
SVLL management, they have been saying, we are not running away anywhere, we will return
your money soon. In fact, SVLL's senior officials always boost off of having political linkages
with state's ruling party and some senior leaders."

In an image, exclusively with Indiatoday.in, the chairman of SVLL Roopchand Baid is also seen
with Prime Minister of India - Narendra Modi. IndiaToday.in also came to know that SVLL has
been one of the major suppliers of LED trucks and other logistics to selected political parties
during election campaigns.

To sum up, its not the end of the SVLL story, if sources are to be believed than CBI has just
begun its discreet enquiry in this case.