ISLAMABAD: The Chaudhrys of Gujrat seem to be getting into a thick bank
loan default soup involving Rs 300 million as they have been accused of
‘stealing’ the pledged stocks for which the creditor bank is
considering the option of lodging a criminal FIR against their textile
mills and all its directors.
Charges against the Kunjah Textile Mills, which belongs to the
Chaudhrys and is looked after by Shafay Hussain, the son of Chaudhry
Shujaat Hussain, are serious, including change of directors without the
bank’s knowledge, pledging of same collateral to different lenders and
the alleged stealing of the pledged collateral and its unauthorised
According to sources, if the irritants are not
immediately resolved and defaulted money not paid back, things will
really turn grave for the top political leadership of the Pakistan
Muslim League-Quaid (PML-Q).
Shafay Hussain, when contacted,
categorically denied that they had defaulted on any loanor were ever
involved in stealing business.
The National Bank of Pakistan
(NBP) President, Syed Ali Raza, however, admitted that the Kunjah
Textile Mills had defaulted on the NBP’s loan, but denied that he was
considering lodging a formal FIR against the defaulters.
he said, the NBP was working on a strategy in consultation with some
other banks, which also faced default on payment of loans from the same
Kunjah Textile Mills, to amicably recover their money.
the bank documents available with The News show extensive
correspondence between different NBP authorities discussing the option
of lodging an FIR against the Kunjah Textile Mills. These documents
also clearly talk of the ‘stolen’ stocks by the management.
to the documents, the Credit Committee of the NBP was informed that on
May 5, 2008 the management at the mills site in Gujrat had forced the
godown staff, posted by the bank as caretaker, to leave the mills
premises and had taken away 19,135 cotton bales and 3,485 yarn bags
pledged with the NBP without any lawful reason or justification and
despite protest and resistance of the bank’s godown staff.
bank was in custody of the said stocks, which were in their lock and
key. The signboards stating that the goods were pledged with the NBP
were also put up in the godown. The mills management had removed the
board of the NBP.” The value of these pledged but ‘stolen’ goods is
said to be Rs 244.4 million.
In its meeting on June 28, the
Credit Committee classified the loan worth Rs 308 million, which was
offered to the Kunjah Textile Mills as a bridge financing facility but
remained unpaid despite repeated extension as ‘Loss’. In the same
meeting, the committee inquired whether the other creditor banks had
filed an FIR against the borrowers. The committee was told that like
the NBP, the UBL was also affected but the latter had not filed any FIR
against the mills. Regarding filing of an FIR, the committee decided
that the matter needed to be reviewed in line with action taken by the
The documents show that after the unlawful removal of the
pledged goods from the mills’ godown, the NBP approached and formally
took up the issue with the mills’ management but did not get any
satisfactory response. “The corporate head (north) personally contacted
the CEO of the mills, Chaudhry Shafay Hussain, but his response was
unreasonable,” said the documents that then talked of serving legal
notice on the client.
It added: “The company has been sent a
multiple of reminders by the NBP with no response. Despite continued
follow up, the customer has not been found willing to regularise the
outstanding bank dues.”
A June 9, 2009 document said if the
adjustment of liabilities was not done within seven days, the NBP would
explore the possibility of an FIR against the directors of the company.
The group chief credit management suggested the option of lodging an
FIR against the company but in view of the unexplained ‘sensitivities’,
the NBP delayed the matter despite the regional audit office Lahore’s
recommendation to decide the pending issue.
The documents show a
group of officials within the NBP are opposing the extreme action of an
FIR against the Chaudhrys Textile Mills and its directors.
letter dated August 3, 2009 clearly categorised the unlawful sale of
pledged stocks as ‘stolen’ and pressed for the lodging of an FIR
against the mills and its directors. Addressed to chief manager, NBP,
Main Branch, The Mall, Lahore, it said: “As you might be aware, the
basic security of NBP’s outstanding Cash Finance facility of Rs 242.493
million in this account is pledge of stocks which as per your report
has already been stolen”.
In the same letter, it said: “As a
legal requirement, the criminal complaint/FIR etc has to be filed by
the branch manager/credit office dealing with the case at the time of
arising of cause of action, and first hand evidence has also to be
produced by them directly in the court/police station as the case may
be. The case may be transferred to SAMG (Special Asset Management
Group)-North immediately after filing of criminal complaint for
pilferage of pledged stocks to safeguard the interest of the bank”.
is a lot of correspondence exchanged between different departments of
the bank, disputing whether or not the Credit Committee has decided in
favour of lodging of an FIR against the borrower. One of the NBP’s vice
presidents says the Credit Committee has not decided in favour of
lodging of an FIR against the borrower rather the committee held the
view that action be taken in line with UBL, because NBP holds pari
passu (two or more loans having equal rights of payment) charge of Rs
133 million with UBL on fixed assets and Rs 170 million on plant and
machinery of the company.
“Our senior BLA has issued a legal
notice to the borrower, which implied that the nature of case suggested
that filing of recovery suit against the borrower to recover the bank’s
dues is the best remedy in this case.”
But in other documents,
it has been argued that the Credit Committee did not bar the bank to
lodge an FIR for ‘illegally removing (stealing)’ pledged stocks by the
borrower in May 2008. An executive vice president of the bank laments
that despite audit observations, no FIR/criminal complaint was lodged
or any other legal recourse was adopted by the branch, despite lapse of
considerable time of more than one year. In criminal cases, the first
hand evidence and the time lag since the arising of the cause of action
is most important, which is in the knowledge of the branch.
added: “The time lag between the incident and initiative of an FIR etc
would be a negative factor in this case as more than one year has
He further said the Credit Committee had
advised to review the case in line with UBL’s legal action against the
borrower, but you would be better aware that the UBL held first charge
on fixed assets of the company as their basic security and therefore,
they are going for filing recovery suit, whereas in NBP’s case, the
basic security is pledge of stocks, which is already totally removed
illegally by the borrower and therefore, recovery suit would not be the
best remedy for the NBP, rather filing of criminal complaint/FIR would
be the suitable remedy for the NBP.
The bank documents also
reveal that the directors of the company have been changed frequently
without the approval of the bank on the various dates. It said that in
June 1994, the executive director of the company informed that three
directors of the company had resigned and three new directors had been
appointed. Those resigned include Ch Wajahat Hussain, Ch Shafaat
Hussain and Ch Sabahat Elahi while those appointed were Haji Lal Din,
Muhammad Riaz and Sher Muhammad.
In 2000, the company said that
one of its directors, Sher Muhammad, had been replaced by Hamid Mirza.
In 2001, the company informed the bank that another director Khalid
Mehmood was replaced by Kamran Rasool, former Punjab chief secretary
and former defence secretary. In 2007, three directors, including
Muhammad Umer Virk, Khalid Mehmood and Hamid Nazir, resigned and were
replaced by Shafay Hussain and Salik Hussain, both sons of Chaudhry
However, as per the search report dated August
26,2008 of the bank, the directors are Hamid Nazir, Ahmad Khan Bhatti
and Manzoor Ahmad Mir.
NBP President Syed Ali Raza, when
contacted, told this correspondent that the Kunjah Textile Mills had
defaulted on the bank’s loan. He said his bank was preparing a strategy
to get the loan recovered jointly in cooperation with some other
creditors of the same borrower. He also confirmed that same collateral
was offered by the company to different banks. Ali Raza, however,
denied that there was any option under consideration to lodge a
criminal case (FIR) against the company’s director.
Hussain, the CEO and one of the directors of the Kunjah Textile Mills,
when contacted by The News categorically denied that the Kunjah Textile
Mills had defaulted on any bank loan. He belied the bank’s claim that
the pledged stocks of the mills godown were stolen or unlawfully sold.
“This is a complete lie. No such thing has ever happened. We can never
even think of it,” he said. Shafay Hussain was appreciative of this
correspondent for getting his side of the story, and believed that
their political opponents might have cooked up this story and provided
the documents to The News to malign the family.