Mortgaged But Not Paid: How PMC Bank Held Property Without Disbursing Loan To Prithvi Realtors & Hotels Pvt Ltd

Mumbai: In a case concerning Prithvi Realtors and Hotels Pvt Ltd and Maharashtra Co-operative (PMC) Bank, several questions have been raised regarding the alleged non-disbursement of significant mortgage overdraft facilities, and the bank allegedly holding on to the mortgaged property despite no disbursal of the corresponding loan amount.

About The Case

PMC Bank officials were unavailable for comment. Audit reports examining Prithvi Realtors and Hotels Pvt Ltd’s mortgage loan transactions with PMC Bank reviewed key documents, including applications for mortgage overdraft limits, registered deeds of mortgage, and statements of affairs spanning from March 10, 2007, to October 10, 2019. A document accessed by the FPJ states: “Upon review of the statement of account of Prithvi Realtors and Hotels Pvt Ltd, it appears there have been no disbursements or utilisations recorded post October 31, 2012. Based on the said statement, only interest has continued to accrue since that date, with no further transactions reflecting disbursement, utilisation, or repayment activity thereafter.”

The report concludes that, “In light of the above, and as per the records reviewed, it may be inferred that the facilities sanctioned – including the application for mortgage overdraft of Rs10 crore dated January 17, 2013, the application for Rs10 crore dated April 3, 2017, and the subsequent enhancement of the overdraft limit to Rs77.5 crore dated April 5, 2017 – do not appear to have been disbursed, as no such disbursement is reflected in the statement of account.”

Speaking on condition of anonymity, an officer associated with the preparation of the audit report clarified that the initial loan amount was Rs 10 crore, which was increased from time to time, and the loan remained active with regular transactions up to a total disbursed amount of Rs 30 crore. This Rs 30 crore was duly disbursed by the bank. However, the enhanced loan of Rs 87.5 crore, which was to be secured by additional mortgaged property, was never actually disbursed by the bank.

“The property was mortgaged against the enhanced loan facility, even though there was no actual disbursement. In 2017, another sanction letter of Rs 87.5 crores was issued against the same property, but again, there was no disbursement,” the officer stated. The report further reveals that PMC Bank renewed or issued fresh sanction letters and mortgage deeds for the loans existing between 2010 and 2013, despite no new disbursements taking place.

“What the bank essentially did was attempt to ‘evergreen’ the loan,” the officer said. Evergreening refers to the practice of avoiding classification of a borrower’s account as a Non-Performing Asset (NPA) by artificially showing that the loan is performing, typically by issuing new loans or restructuring the existing ones.

“In this case, Prithvi Realtors had already stopped servicing the loan; no interest or EMI were made after the initial Rs 30 crore loan. After 90 days of non-payment, the account should have been classified as an NPA, and technically, the bank should have stopped disbursing any further credit. Instead, PMC Bank kept sanctioning facilities in tranches of Rs 5 crore, claiming interest was being served, when in fact, it was not. They kept adding the accrued interest to the principal, inflating the loan figure to Rs 87.5 crore,” the officer added.