The High Court of Karnataka has declined to quash the chargesheet filed against Vakati Narayana Reddy, AP MLC, for allegedly cheating a government-owned industrial financial institution of ₹190 crore.
He has been accused of securing loan based on the inflated valuation of the lands mortgaged by VNR Infrastructures Ltd. (which is now under liquidation), of which he was the managing director and corporate guarantor for the loans.
Justice K. Natarajan dismissed the petition while observing that “by looking to the entire material on record, there is no case made out by Mr. Reddy to quash the criminal proceedings, he has to face the trial and take all the contentions as defence during trial.”
The Central Bureau of Investigation (CBI) had registered the First Information Report in May 2017 based on the complaint lodged by IFCI Ltd., a government of India undertaking, and the chargesheet was filed against the company, Mr. Reddy and others in March 2018.
The company had mortgaged several acres of non-agricultural lands in two locations, one situated in Mehboobnagar district and another situated at Rangareddy district in Telangana State, to secure the loans of ₹90 crore and ₹100 crore respectively during 2014-15.
The two property valuation firms, appointed by the IFCI, had given separate reports indicating that value of the lands in Mehboobnagar was worth between ₹257 crore and ₹282 crore; and the lands at Rangareddy district were worth between ₹320 crore and ₹325 crore.
As the company stopped repaying loan within four months of release of the loan, the IFCI initiated recovery proceedings and when another firm was appointed to value the mortgaged lands, the shocking detail swere unearthed that the lands at Mehboobnagar was worth only around ₹24 crore and lands at Rangareddy were worth only ₹6 crore.
It was alleged by the IFCI that two valuation firms in connivance with the company, Mr. Reddy and some employees of IFCI had inflated the land values for availing loan.
The High Court, which analysed the charge sheet, had declined to accept Mr. Reddy’s contention that it is a civil dispute as the IFCI had initiated recovery proceedings against the company as per the law and hence no criminal proceedings can be initiated in the same issue.
