Edelweiss on Nitin Desai's death: 'No undue pressure, interest charged as per prevailing market rates'

Financial services company Edelweiss on Sunday said that no undue pressure was put on art director Nitin Desai and that the interest rate on the loan given to him was as per prevailing market rates. Desai, who had taken a loan of about Rs 185 crore, was found dead at his Mumbai studio on August 2. Reports emerged saying that Desai was under pressure as he had defaulted on his loans.

Maharashtra Deputy Chief Minister Devendra Fadnavis last Thursday said that the role of the lending firm would be probed to know whether he was charged high interest and if he was under mental stress. This statement came after BJP MLA Ashish Shelar demanded a probe into Desai's death. Shelar said Desai had taken a loan of Rs 180 crore, which rose to Rs 252 crore. "This brings forward the functioning of the lending system by Rashesh Shah and Edelweiss ARC company," Shelar alleged.  

In its reply, Edelweiss, whose subsidiary ECL Finance Ltd had given loans to Desai, said that there was no wrongdoing of any nature. It said Desai was the promoter of ND's Art World Pvt Ltd (NDAWPL), which had obtained loans of Rs 150 crore and Rs 35 crore in 2016 and 2018 respectively from ECL Finance Ltd (ECLFL).

"These loans were mainly given towards capital expenditure for the theme park and partly for repayment of existing debt, general corporate purposes, and working capital needs," the company said in a detailed note. "We emphasize that NDAWPL was disbursed financial assistance at prevailing market rates."
 
According to the statement, Desai's company encountered financial difficulties in 2019 and went into default thereafter. The financial firm said various attempts to improve the financial condition of the art company did not bear fruit. "The loans were assigned to CFM Asset Reconstruction Company Pvt Ltd (CFM) which had initiated various legal actions under due provisions of law."

"Edelweiss ARC (EARC) acquired a portfolio of assets from CFM under auction process which included NDAWPL and merely continued with legal actions that were initiated earlier. The company was eventually admitted under IBC by NCLT Mumbai on July 25, 2023," the statement said, adding that Desai's appeal against the NCLT order was dismissed by the NCLAT on August 1, and he took his life the following morning.

Edelweiss said that ECLFL and EARC have acted "fully in accordance with the letter and spirit of law" and the regulatory framework established by the RBI which prescribes that, pursuing recoveries on NPA accounts is not just a right of creditor but also an obligation. The company further said that "the interest rate charged by ECLFL was as per prevailing market rates". "Legal processes for recovery are elaborately established under RBI and IBC guidelines and were duly followed by EARC."

"At no time was there any undue pressure being put on the borrower for recovery. We will cooperate fully with the authorities and are confident that the processes set in motion will reaffirm that the ECLFL and EARC acted well within the boundaries set and the frameworks established by the RBI," the statement said.  

An FIR has been filed against four persons and Rashesh Shah, Chairman and Managing Director of Edelweiss.