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Ria Jain made post

With allegations of fraud against Jagdish Khattar by PNB, will this hit the stock price of Maruti or of PNB?

Answer
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Anu Biswas answered.
8 months ago


The allegations of fraud to the extent of Rs.110 crore have been made by PNB against Carnation Auto, a company floated by Jagdish Khattar after he retired from the helm of Maruti. Carnation Auto was involved in the purchase and sale of second hand cars as well as running a service centre for all types of cars. The company had been sanctioned lines of credit by PNB, which had a long association with PNB.

The company, Carnation Auto, eventually went bankrupt and defaulted on the loans taken from PNB. In response, PNB had charged Carnation Auto and its founder Jagdish Khattar with cheating the bank and defrauding them of Rs.110 crore. In his defence, Jagdish Khattar has consistently maintained that this was a business failure and therefore a risk in the normal course of business. Earlier investigations into the existence of fraudulent intent in the loan default did not yield anything fraudulent.

Regarding PNB, it is one more in the series of losses the bank has had to take. This is nothing compared to the Rs.15,000 crore loss it had to take on account of defaults by diamantire, Nirav Modi. But it certainly raises questions over the credit review and monitoring system at PNB and is likely to impact its valuations substantially in the coming days. Regarding Maruti, the impact is likely to be limited as Khattar is not involved with Maruti any longer and this case also pertains to the period when Khattar had already left Maruti and launched his own venture.