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Our Bureau

Mumbai , March 23

BANK of India (BoI) has denied knowledge of frauds perpetrated by the Bank of Credit and Commerce International (BCCI), and maintains that they were normal inter-bank business transactions.

BoI informed the Bombay Stock Exchange that it is appealing against the judgment passed by the London High Court for it to pay around $82 million (around Rs 370 crore) in compensation for fraudulent transactions with the collapsed BCCI.

According to BoI, its London branch, which had correspondent business relations with BCCI, entered into six transactions with it. These were, on November 19, 1981, for £10 million; August 9, 1982, for $30 million; October 9, 1983, for $60 million; August 9, 1984, for $75 million; December 18, 1984, for $50 million; and on September 12, 1985, for $100 million.

Barring one transaction on December 18, 1984 of $50 million, the essence of the rest of the transactions was that BCCI placed deposits with Bank of India of equivalent amounts as stated above. Bank of India lent the same amounts to a certain borrower Maran Trading, which was nominated by BCCI at a higher margin. The December 18 transaction was between BCCI and Bank of India at the same rate of interest. The credit transactions were also secured by an irrevocable guarantee of BCCI (Overseas) Ltd, BoI has said in a notice to the BSE.

BCCI went into liquidation in 1991. Due to allegations of fraud perpetrated by BCCI; Serious Fraud Office, London commenced investigations into the affairs of BCCI in 1993 and asked for some documents and information from its London office in connection with BCCI transactions. On production of the information, the Bank was not required to give any oral evidence and was also not indicted in any way.

Subsequently, BoI was served a protective writ in October 1997 by the liquidators of BCCI and claims were brought under the Insolvency Act, 1986, according to BoI.

The liquidator contended that the aforesaid transaction of BCCI with Bank of India had no commercial purpose but enable BCCI to manipulate fraudulently the published results of BCCI Group.

The London High Court judge, Mr Justice Nicholas Patten, said that the then chief executive of Bank of India and the bank did not take enough care to verify the commercial purpose of the transaction where losses contributable from Bank of India to the liquidators will be $43.221 million and together with simple interest at base rate plus one per cent aggregating to $82 million from the date of liquidation of BCCI.

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