PMC Bank fraud supplementary charge sheet claims ‘deep-rooted conspiracy’
The charge sheet says the loan facilities extended to the HDIL group of companies was “frequently discussed” and sanctioned with the “majority of votes” in board meetings and that the directors “did not care to look into the loan facilities”.Updated: Feb 14, 2020 16:58 IST
There was a “deep-rooted conspiracy” in the Rs 6,670 crore PMC Bank fraud case and the board of directors, who flouted the basic Reserve Bank of India (RBI) guidelines resulting in the fraud, were guilty of willful omission and commission, revealed a supplementary charge sheet filed last week by the Economic Offences Wing (EOW) at the Esplanade court.
The charge sheet which is based on the forensic audit report said the bank’s auditors, chairperson Waryam Singh, and Housing Development Infrastructure Ltd (HDIL) promoters- Rakesh Wadhwan and Sarang Wadhwan-- had old ties which were exploited for carrying out the fraud.
On February 5, the EOW filed a supplementary charge sheet against the bank’s former board of directors (BODs)-- Rajneet Singh (45) (son of former BJP MLA Sardar Tara Singh), Jagdish Mookhey, Trupti Bane and Mukti Bavisi and statutory auditors, Jayesh Sanghani and Ketan Lakdawala and concurrent auditor Anita Kirdat (48).
The charge sheet says the loan facilities extended to the HDIL group of companies was “frequently discussed” and sanctioned with the “majority of votes” in board meetings and that the directors “did not care to look into the loan facilities”.
The charge sheet alleges the board of directors did not follow the basic Dos and Don’ts guidelines specified for the board in 2012 which led to the fraud. The final audit report is awaited and a second supplementary charge sheet will be filed in the fraud case in the near future.
The charge sheet revealed that in the financial year 2007-08, the RBI levied a fine of Rs 5 lakh on PMC bank for six violations including the grant of unsecured loans of Rs 10 crore and window-dressing of the balance sheet.
“Thus based on the above facts, the RBI had already raised red flags for multiple irregularities in the operation of PMC bank but the BODs never discussed these irregularities. Hence, willful omission and commission (was) done by them,” stated EOW in the charge sheet.
“They intentionally did not disclose 31 accounts of HDIL to RBI inspection team. These 31 accounts were neither classified as non-performing assets (NPA). Neither was sufficient collateral/security against the loans taken. Certain property purchased at potential higher price and advances were given to HDIL against the purchase of property but the said property was never transferred to PMC bank,” read an excerpt from the charge sheet.
Commenting on the role of the auditors, the charge sheet cites potential conflict of interest and says auditing firm Ashok-Jayesh associates, which was previously run in partnership by Ashok Gupta, a chartered accountant who had ties with the Wadhwans—Rakesh and Sarang-- was hired by the bank between 2008 and 2011 and again from 2014 to 2017.
Not just that, the charge sheet says Gupta was inducted as a director in HDIL companies-- Derby Developers Pvt Ltd and Bluestar Realtors Ltd after he left the auditing firm in 2005. Gupta was also co-opted as a director of the PMC bank till April 2015.
In this period Ashok-Jayesh associates, which was then being run by Gupta’s ex-associate Lakdawala (60)-- also a chartered accountant--made a total of Rs 2.12 crore as fees, says the charge sheet.
Lakdawala made Rs 70 lakh in fees as an auditor between 2017 and 2019. The hefty fees was paid for filing audit reports as desired by Joy Thomas, former managing director of PMC bank. Lakdawala has been arrested in the case.