Himal Press 
KATHMANDU: Nepal Investment Mega Bank (NIMB) CEO Jyoti Prakash Pandey was arrested on Tuesday night in Sindhuli.
According to the Central Investigation Bureau (CIB) of Nepal Police, Pandey was arrested for illegally auctioning Smart Telecom’s assets with the “dishonest intention of depriving the government of its rightful claim, amounting to fraud and criminal breach of trust.”
The bank had pledged assets pledged by Smart Telecom to recover its loans in September last year, more than two years after the company’s ownership came under the government. The Nepal Telecommunications Authority (NTA), the telecommunication sector regulator, seized control of Smart Telecom in April 2023 as per Rule 18 of the Asset Management Rules for Telecommunications Service Providers Whose Licenses are Not Active, 2022
Concerned government agencies and the bank have made conflicting claims after Pandey’s arrest.
A consortium of NIMB and Prime Commercial Bank has extended Rs 5.2 billion to Smart Telecom, led by NIMB, through instruments such as letters of credit for the import of telecommunication equipment, overdrafts, and long- and short-term credit. Smart Telecom had pledged its entire network, machinery, and equipment as collateral for the loan.
The bank has claimed that it auctioned off the assets pledged to it by the company to recover its loans, as per Section 57 of the Banks and Financial Institutions Act, 2017. “Notwithstanding anything contained in the deed of loan or in the prevailing Nepal law, the bank or financial institution may recover its principal and interests having sold by auction the assets taken or put as mortgaged by the borrower in the name of the bank or financial institution, if the borrower fails to abide by the terms of the credit as mentioned in the deed or agreement or any terms and covenants made with a bank or financial institution or fails to repay credit to the bank or financial institution within the time-limit stipulated in the deed, or if the bank or financial institution is found, through the monitoring conducted pursuant to Section 56, that it has misused the credit by using it for the purpose other than the purpose for which it was disbursed,” Section 57 of the Act states.
NIMB had published a 15-day public notice to auction off assets pledged by Smart Telecom in September last year. Ncell Axiata had won the auction by bidding Rs 4.6 billion for the assets.
However, the Nepal Telecommunication Authority (NTA), the telecommunication sector regulator, has maintained that all network and equipment of Smart Telecom came under its control as per the Asset Management Rules for Telecommunications Service Providers Whose Licenses are Not Active, 2022. “The licensee shall not, without the approval of the Authority, pledge as collateral, mortgage, sell, or otherwise transfer the title of any property that is to come under the ownership of the Government of Nepal after the expiry of the license period at least three years before the expiry of the license period,” Rule 6(2) states. Rule 3 states that any act of pledging as collateral, mortgaging, selling, or otherwise transferring title shall be automatically void.
Smart Telecom’s license was automatically scrapped on April 16, 2023, following the company’s refusal to renew the license.
As per Rule 18, NTA should clear the liability of the operator within three months of taking such control from the cash balance or income of such service provider in a manner that does not obstruct the continuity of services. “In the event that liabilities cannot be paid from the cash balance or if there is no cash balance, the service provider whose license is no longer subsisting must pay the total liability in accordance with the prevailing law,” it adds.
