Canara Bank recovers ₹510 crore from Rajesh Exports after DRT order

Recovery after tribunal order

Canara Bank has recovered all its dues totaling ₹510 crore from Rajesh Exports, following an order by a debt recovery tribunal (DRT) that directed the company to deposit the amount to prevent the sale of its properties. The recovery marks the culmination of a legal process that began when the account turned non-performing in 2020, according to reports by The Economic Times and Outlook Business.

The bank had initiated the DRT action after the company blocked attempts for recovery through the bankruptcy code, as reported by The Economic Times. The account was admitted to the DRT in 2021, and the bank also filed a case under the Insolvency and Bankruptcy Code before the National Company Law Tribunal (NCLT) while starting parallel recovery action under the SARFAESI Act, a person aware of the details told The Economic Times.

Legal proceedings and execution

Rajesh Exports subsequently obtained a stay from the Karnataka High Court on several recovery actions, but the DRT proceedings continued. The tribunal ruled in Canara Bank's favour after almost six years, according to the person quoted by The Economic Times. The lender then approached the Karnataka High Court seeking permission to implement the decision, and the High Court allowed the DRT order to be executed while dismissing petitions filed by Rajesh Exports challenging its implementation. The ₹510 crore was then transferred to a Canara Bank account, the person told The Economic Times.

Canara Bank, the largest creditor for the Bengaluru-based gold and jewellery exporter, had the first charge over around ₹400 crore worth of land and properties belonging to Rajesh Exports in and around Bengaluru, and security over the company's inventory and receivables valued at around ₹4,000 crore in 2023, as reported by Outlook Business.

Regulatory scrutiny

The recovery comes against the backdrop of regulatory action by the Securities and Exchange Board of India (SEBI). In June, SEBI alleged large-scale financial misrepresentation, non-cooperation with investigators and possible inflation of the company's reported revenues. In a 109-page interim order dated June 3, SEBI said its investigation and forensic examination had found prima facie evidence suggesting that as much as 97-99% of Rajesh Exports' reported revenue may have been inflated, describing the findings as 'egregious and unheard of', as reported by Outlook Business. SEBI has also restrained Rajesh Mehta from buying, selling or otherwise dealing in securities of Rajesh Exports until further orders.

The Economic Times and Outlook Business both reported these details, with Outlook Business citing the SEBI order and The Economic Times attributing statements to a person aware of the details.