HYDERABAD: The Telangana High Court granted an interim suspension of the show cause notice issued by Indian Overseas Bank (IOB) to MBS Jewellers Pvt Ltd asking it why it should not declare the company’s loan account as fraudulent.
MBS Jewellers challenged the notice in court, claiming that it was issued nearly eight years after the initial loan default and without giving them a proper opportunity to be heard.
MBS Jewellers had availed a loan from IOB in 2008, which included cash credit limits, letters of guarantee and demand loans in gold, with flexibility between the credit and guarantee limits. The account was declared a Non-Performing Asset (NPA) in 2013 following a default, leading to proceedings under the SARFAESI Act and the RDDBFI Act. The matter is currently pending before the Debt Recovery Tribunal (DRT).
Subsequently, IOB assigned the debt to Raytheon Asset Reconstruction Company for a valuable consideration, effectively transferring the entire debt of MBS Jewellers to the Raytheon.
Despite this transfer, IOB issued a show-cause notice to the company nearly eight years later, alleging fraudulent activities in the use of bank guarantees and cash credit facilities. The bank cited that guarantees worth `70 crore issued during 2011-12 had been invoked by MMTC, and raised concerns about the mortgaged property at Hafeezpet, Hyderabad.