Dispute Between Two Regulatory Bodies Over Jyoti Pandey’s Arrest and Auction of Smart Telecom Assets
Image Credit: Smart Telecom
Following the arrest of Jyotiprakash Pandey, CEO of Nepal Investment Mega Bank, on allegations of illegally selling assets of a government-controlled telecom service provider, a dispute has erupted between two regulatory authorities over the matter.
Officials from the Nepal Telecommunications Authority (NTA) have stated that it is illegal for any telecom service provider’s assets under the regulator’s control and valuation process to be suddenly auctioned off. Conversely, some banking professionals contend that banks have the right to auction collateral assets to recover loans, expressing concern over the arrest of a bank CEO in this context.
Recently, details emerged showing that Nepal Investment Mega Bank sold the movable and immovable assets of Smart Telecom to another registered telecom operator, Ncell, for approximately 450 million Nepalese rupees through an auction process.
Subsequently, the police arrested CEO Jyotiprakash Pandey on Tuesday on charges of fraud and breach of trust, which has sparked widespread discussion.
Before detaining CEO Pandey, the police had already arrested three other individuals connected to Smart Telecom: Sarvesh Joshi, Palina Shrestha, and Narendra Ulak.
Authorities indicated that these individuals acted with the intent to dishonestly violate the rights of the Government of Nepal’s assets.
“Upon receiving information that government assets were auctioned off, we initiated action,” said Amrendra Bahadur Singh, acting spokesperson for the Central Investigation Bureau (CIB), on Wednesday.
According to a CIB statement, the bank’s auction notice was published last October, during which Smart Telecom’s equipment-installed landowners were acknowledged a payment sum, including an additional 40 million rupees, but to date, have not been paid.
What Happened?
According to NTA spokesperson Meen Aryal, after Smart Telecom failed to renew its license in April 2023 (Baisakh 2080 BS), the authority took control of all the company’s assets.
An official notice from the authority states: “As per Rule 18 of the Telecom Service Provider Asset Management Regulations, 2022 (2079 BS), assets and infrastructure of telecom service providers who have not been granted permission to collect dues owed to the Government of Nepal, the Authority, and other bodies shall be taken under the Authority’s control.”
The notice also says, “Before being taken into control (on Baisakh 21, 2080 BS), Smart Telecom must bear all outstanding debts it owes to others and neither the Government of Nepal nor the Authority will bear any liabilities.”
However, when the control was intact, Nepal Investment Mega Bank went ahead with auction procedures, issuing its own public notice without the authority’s knowledge.
Spokesperson Aryal noted, “We were in the process of valuation according to the Asset Management Regulations, but had no information about the auction.”
The issue came to light only when Ncell requested approval from the authority to use the auctioned materials, he added.
“We have already informed Ncell that the auction process is not legal,” Aryal confirmed.
On the other hand, some bankers expressed surprise at the regulator’s lack of awareness while a public auction notice was issued, calling the incident a serious matter.
Santosh Koirala, chairman of the Nepal Bankers Association, said, “If this is what happens during loan settlement, the entire sector will face problems.”
What Do the Central Bank and Bankers Say?
Image Credit: NRB
Banks argue that if they are not allowed to auction collateral pledged against loans, they would be unable to return depositors’ funds.
Santosh Koirala, chairman of the Bankers Association, stated, “Banks have first rights over collateral. They have the authority to sell collateral pledged for loan recovery, and the Bank and Financial Institution Act (BAFIA) has established this law.”
BAFIA refers to the Bank and Financial Institution Act, 2016 (2073 BS).
NRB spokesperson Guruprasad Paudel explained that provisions under BAFIA and other laws permit auctioning of collateral if loans are not settled.
“There are guidelines on how to auction collateral if installments are not paid. Banks and financial institutions are implementing these procedures,” he explained. “Section 57 of BAFIA also applies, which allows collateral to be auctioned or, if not sold, classified as non-banking assets when loans are unpaid on time.”
“As of now, my stance is that collateral pledged during loan disbursement must be allowed to be auctioned, and if the loan is settled via auction proceeds, any surplus should be returned to other depositors or coordinated with the government.”
Telecommunications Authority’s Argument
Image Credit: NTA
Officials from the Nepal Telecommunications Authority affirmed that they are proceeding within the legal and regulatory framework as a governing body.
In response, spokesperson Aryal stated, “We were engaged in valuation according to the Asset Management Regulations and have informed the concerned bank to proceed with the necessary processes.”
“We have also communicated with the bank officially. We have fulfilled our responsibilities.”
Efforts to contact the bank’s Chief Information Officer via phone on this matter were unsuccessful.
The authority also stated that it cannot comment on police actions at present.
“The central bank is the regulator concerning banking matters. Since the regulatory bodies differ, the laws may vary; however, we operate within the Telecommunications Act and related regulations,” Aryal explained.
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