ADD

It Happens

The Rich Who Want to Be Poor

Tagged Under -
Page 1 of 1
In Kolkata, an unusually high number of people have been declared ‘insolvent’ so they don’t have to repay their debts.

At this time in history, it’s unusual to sympathise with banks. But in Kolkata, where things are inevitably upside down, it seems thousands of people have been cheating banks and creditors by declaring themselves bankrupt while being very much in the black.

The Calcutta High Court’s registrar of insolvency has been issuing certificates, declaring anyone and everyone, including rich businessmen and irresponsible credit card holders, ‘insolvent’. The racket, say court officials, has been running for the past few years and also involves half a dozen lawyers who file applications for insolvency certificates.

The registrar is supposed to investigate every application and ensure that an applicant is indeed insolvent, which the law defines as the inability to repay even a loan of Rs 500. But, according to an observation by Calcutta High Court Justice Sanjib Banerjee—who has ordered a probe into the racket—the Registrar has been issuing insolvency certificates ‘without enquiry and application of mind’, which amounts to ‘gross dereliction of duty’. In fact, some lawyers advertise that they can secure insolvency certificates within a fortnight for a 5 per cent commission on dues up to Rs 5 lakh and 3 per cent commission on monies above that.

It explains the incredible rise in insolvency cases over the past few years. Till 2006, there were about 10 to 15 insolvency applications a year; in 2007 the number went up to 43; then 202 in 2008; 1,018 in 2009, and there were 35 in the first week of January this year. From 2008, the registrar hasn’t rejected a single application. Apparently the registrars were so convinced of the validity of every single application that they even ignored provisions in the law allowing creditors to contest insolvency applications.

Justice Banerjee has asked the current Registrar, Abhijit Chakraborty, the ‘official assignee’, NK Ghoshal, and their predecessors to explain their conduct. The police are probing the racket and the state Bar Council is completing an enquiry against advocates.

It all came to light when a private bank discovered that one Avijit Majumdar got an insolvency certificate in June last year to avoid repaying credit card dues of Rs 4.5 lakh, though he was making monthly EMI payments of Rs 3,644 against a car loan.

It isn’t just banks that have lost money. In 2007, an affluent Kolkata-based businessman with several properties, sedans, and a plush office in tony Wood Street, ducked paying Rs 43.95 crore in income tax, customs duties, sales tax and loans with an insolvency certificate. Justice Banerjee has asked this tax-shirker and many others blessed by the largesse of insolvency registrars, to file affidavits explaining the anomalies in their financial status.