Bank of India (BoI) has decided to appeal against the London High Court's judgement asking it to pay $82 million in compensation to the official liquidator for its 'fraudulent' transactions with the collapsed Bank of Credit and Commerce International (BCCI). |
Banking analysts said Bank of India's bottomline will take a knock if its auditors insist on making a provision for the compensation. |
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In case the auditors insist on full provisioning, the bank will be required to set aside Rs 350 crore. However, a senior Bank of India official said pending disposal of the bank's appeal, it may not have to pay any compensation and hence provisioning will not be required. Bank of India had posted a net profit of Rs 851 crore last financial year. |
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While emphasising that there was no involvement of the bank in any 'fraudulent' transactions, the official said the case pertained to transactions undertaken in the early the 1980s. "We've yet to get details of the judgement, which runs into 143 pages. We're surprised at the judgement. It is too harsh. The bank will appeal," he said. "We're hopeful of getting a positive response to our appeal as State Bank of India, in a similar case, got relief," the official pointed out. |
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At thehearing BoI denied knowledge of the development. Judge Nicholas Patten, however, launched a scathing attack on its oversight procedures and said allowing the bank to duck responsibility would set a precedent. The judge awarded damages of $43.2 million to Deloitte (the liquidator), which, along with an interest of $ 39 million has resulted in the compensation bloating to a little over $82 million. |
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The judge said Bank of India's London-based manager, K L Samant, knew that BCCI's deposits with the bank were being used to defraud BCCI creditors and that the bank must bear responsibility for the manager's actions. |
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BCCI collapsed in 1991, owing $16 billion in the world's biggest banking fraud. The liquidator is currently pursuing a separate lawsuit of nearly $1.8 billion against the Bank of England, the UK central bank, over its regulatory role in the collapse. |
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BCCI was closed in 1991 by regulators in a worldwide swoop, partly organised by the Bank of England, after it was discovered the lender had disguised losses and was insolvent. Founded in 1972 by Agha Hassan Abedi, a Pakistani banker, BCCI grew from a small Asian bank to an empire spanning 69 countries with $20 billion in assets. |
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