The Civil Court issued an order last week directing Maldives Police Service and all relevant entities to assist the State Bank of India (SBI) in handing over Palm Beach Resort, which was mortgaged to the bank, to its buyer.
Palm Beach Resort, located in Lhaviyani Atoll, was mortgaged to SBI for a loan taken by Guardian Agency Pvt Ltd and Monaza Construction Pvt Ltd.
Following failure to repay the credit facility, SBI had initially filed a lawsuit against the borrowers and guarantor, the latter being Ibrahim Ali Manik who owns the Head Lease Rights of Palm Beach Resort. The Civil Court ruled in favour of the bank and ordered the borrowers and guarantor to settle the repayments.
However, upon further failure to do so, SBI had filed an enforcement case, resulting in the Civil Court permitting the bank to sell the mortgaged resort.
The bank announced the auction on October 15, 2020.
The Civil Court's latest order, which was dated January 6, 2021, noted that SBI had agreed to grant the borrowers until January 15, 2021 to settle the payments. Hence, the court ordered SBI not to finalise the resort's auction within that period. It also extended the permission previously granted to sell the resort, for an additional three months beginning from January 6.
The Civil Court then directed all relevant parties, including the resort's owners and management, to cooperate with SBI in the proceedings to hand over the resort to its buyer during this period, including allowing representatives from the bank and prospective buyers to visit and inspect the property.
In the event of any obstructions or hindrance, the court ordered the Maldivian police to assist and facilitate the bank's endeavours to visit and sell Palm Beach Resort.
The Civil Court's order came in the wake of a local media report, in which Palm Beach Resort accused SBI of sending a "warning" letter regarding a due diligence assessment.
Per the media reports, SBI's letter "warned" the resort staff to conduct themselves in a manner that would not bring about any embarrassment, when the team from SBI and the resort's bid-winning company visited the property to conduct the due diligence.
Furthermore, the article reported that in the letter, the bank had warned the resort not to force its hand by using the Maldivian police.
Responding to the allegations which SBI described as "unsubstantiated claims", the bank told The Edition, "... the bank has never and will never issue threats of the sort to any of its clients", adding that it would always act within the laws of the country.
The case between Palm Beach Resort and SBI first came to public attention after the resort raised serious allegations against the bank in early October 2020, including foregoing best practices, malice, and "predatory foreclosure".
Palm Beach Resort maintained that SBI's decision to seize the resort despite their out-of-court agreement on settling the loan debt was an attempt to secure benefits for a third party, among other accusations.
A source from Palm Beach Resort's legal team told The Edition earlier in December 2021, that the resort and SBI had initially agreed on a USD 5.5 million out-of-court settlement without resort foreclosure, and that they had paid MVR 1,708,620 (approximately USD 111,000) of the total loan as a deposit.
However, the source stated that SBI later claimed the amount to be USD 8.2 million, to be paid within six months which proved impossible over the economic repercussions of the ongoing COVID-19 pandemic.
"We suggested an independent accounts audit to evaluate how the figure suddenly came to be MVR 8.2 million but the bank refused", they had said.
SBI did not initially issue a formal response to the allegations of "predatory foreclosure" aside from the resort's auction sale notice, when The Edition first reached out to the bank on October 9, 2020, with queries concerning the matter.
However, responding to the allegations of the "warning" letter this week, SBI asserted that even after receiving the Civil Court's permission to sell Palm Beach Resort, it had "acted in good faith and granted several opportunities to settle the dues out of the court or produce an investor".
Regarding the out-of-court settlement, however, the bank stated that the borrower and guarantor had failed to meet the terms and conditions, and thus, "no such arrangement exists now".
The bank has not, however, responded to the allegations that it had raised the out-of-court settlement amount or denied the resort an independent accounts audit.