FIR may spell trouble for MSC Bank directors

The action comes at a time when the state’s co-operative sector made up of a network of banks, sugar co-operatives and spinning mills is losing its political clout.

Violating financial and banking norms to dole out loans to sugar co-operative mills and spinning mills controlled by them and their colleagues could cost some politicians dear.

For more than two decades, the sector had been in the control of ruling politicians from the Congress and the NCP. Over the past five years, the ruling BJP has tightened its screws over the co-operative sector making several changes, including an amendment that bars those who are facing probe in irregularities from contesting elections to such bodies. (HT FILE)

The Bombay high court on Thursday asked the Economic Offences Wing of the Mumbai police to file a first information report (FIR) into the alleged scam at the Maharashtra State Co-operative bank, which was largely controlled by politicians from the Congress and the Nationalist Congress Party (NCP).

The scam dates back to 2010, when the bank had 44 elected and 33 nominated directors and politicians. Former deputy chief minister Ajit Pawar, former NCP minister and now BJP leader Vijaysinh Mohite Patil, NCP MLA Hasan Mushrif, Dilip Sopal, Congress leader Dilip Deshmukh, Madhukar Chavan, PWP leader Jayant Patil, Sena leader Anandrao Adsul were among the directors of the bank during the period.

On Friday, chief minister Devendra Fadnavis said, “The HC orders will be followed and FIR will be filed against all concerned, within the given timeframe.”

The action comes at a time when the state’s co-operative sector made up of a network of banks, sugar co-operatives and spinning mills is losing its political clout. For more than two decades, the sector had been in the control of ruling politicians from the Congress and the NCP. Over the past five years, the ruling BJP has tightened its screws over the co-operative sector making several changes, including an amendment that bars those who are facing probe in irregularities from contesting elections to such bodies.

The court order comes nine years after the 2010 inquiry report of National Bank for Agriculture and Rural Development (Nabard) in the MSC bank affairs revealed the extent of mismanagement by politicians. For instance, the directors and officials had cleared loans to sugar-co-operatives, even when these units had negative worth. This meant that these mills owed the bank an outstanding of Rs. 4,416 crore as on March 31, 2011, of which the non-performing assets (NPAs) were as high as Rs. 708.60 crore. NPAs from co-operative spinning mills stood at around ₹591 crore. The loan committee of the bank was made up of 14 politicians.

“Politicians who were bank directors were also chairmen or directors of the sugar co-operatives or spinning mills that they gave loans to. In many cases, the loans were not utilised for purposes stated in the application, like say handing out arrears to farmers or crushing cane, etc. Then there were cases where loans unrelated to agriculture, co-operative sector were given to family and kin of directors,’’ said a senior co-operatives official.

Following the Nabard report, the Reserve Bank of India dissolved the board and appointed two administrators. An inquiry was initiated by the co-operatives department that ultimately led to a quasi-judicial charge sheet that also indicted the directors for causing losses worth Rs. 1,086 crore to the bank from 2007 to 2010.

However, Opposition claims there can be no case of “malafide intention” or “corruption” in the alleged scam. “The bank at the time had directors from all political parties, who were elected to it following the due process of law. The bank was set up to support the co-operative sector and when loans were given, they were not given to private mills owned by politicians, but co-operatives. So what can be the case against our colleagues or party leaders,” asked NCP state chief Jayant Patil. He alleged that BJP had a hidden agenda to undermine the state’s co-operative sector and Congress-NCP’s control over it.