MSC Bank scam: Mumbai court rejects ED’s plea for intervention

The special anti-corruption bureau (ACB) court on Thursday rejected the plea of Enforcement Director (ED) for intervention in the process of hearing the closure report recently submitted by Mumbai Police’s economic offences wing (EOW) in connection with Maharashtra State Cooperative (MSC) Bank scam.

The special anti-corruption bureau (ACB) court on Thursday rejected the plea of Enforcement Director (ED) for intervention in the process of hearing the closure report recently submitted by Mumbai Police’s economic offences wing (EOW) in connection with Maharashtra State Cooperative (MSC) Bank scam involving politicians from the Maharashtra Vikas Aghadi (MVA) government.

A protest against ED and the BJP government in connection with the Maharashtra State Cooperative (MSC) Bank scam, at Shivaji Chowk in Navi Mumbai. (HT File Photo)

EOW had, in September, filed a closure report in the alleged ₹25,000-crore MSC Bank fraud. The police filed a C-summary in the special ACB court after EOW’s special investigation team (SIT) found no criminal aspect to be investigated in the case.

The agency had filed a first information report (FIR) in the case under sections 406, 409, 420, 465, 467, 468, 471, 120B and 34 of the Indian Penal Code, section 13 (a)(b)(c) of the Prevention of Corruption Act and section 29 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act. The case was filed in August last year on the direction of the Bombay high court (HC) while hearing a public interest litigation (PIL) filed by Andheri-based social activist Surinder Arora who had alleged police inaction into the fraud.

On the basis of the case registered by the Mumbai Police, ED too initiated probe for money laundering. While the Mumbai Police filed a closure report after the probe, ED questioned the probe by the Mumbai Police and sought to intervene. ED also urged the court to reject the closure report filed by the Mumbai Police.

The complaint pertained to thousands of crores of rupees obtained in loans by sugar cooperatives, spinning mills and other processing units from district and cooperative banks.

MSC Bank, the apex bank that controlled credit to the co-operative sector in the state and was handled by then ruling politicians, landed in trouble in 2011 after an inquiry report by National Bank for Agriculture and Rural Development (Nabard) found the bank was in red with a negative of ₹144 crore. The report indicated financial mismanagement on part of the board of directors which led to ballooning of non-performing assets. This was largely due to handing out loans to sugar co-operatives and spinning mills in violation of all norms.

The Mumbai Police in its closure report justified the actions and claimed there was no case. ED, however, questioned the probe.

In Its plea, ED claimed that during their investigation they referred to reports of Nabard available since 2000-01. “On perusal of the said reports, it is found that Nabard has pointed out various irregularities in its every inspection report from the period 2000-01 onwards. The said irregularities pertain to working of the board of directors of the bank, size of the various committees of the bank, documentation and proposing of loan proposal, sanctioning of the loan proposals, non-compliance of various RBI circulars and directions from Nabard, etc,” ED claimed.

The central agency further claimed, “During the course of investigation, it was found that loans were given to sugar mills/companies controlled by relatives of the directors of the bank without assessing loan repayment capacity of the sugar mills/companies.”

It also alleged that the bank did not follow the process stated under the SARFAESI Act while auctioning defaulting Sugar Sahkari Kharkhana (SSK). “It is found that though the reserve price was decided based on the valuation of the valuers, the same was not disclosed in the advertisement as well as in the tender form of the above mentioned 5 SSKs. Therefore, the offer amounts were received well below the reserve price and the SSKs were sold below the reserve price,” the agency claimed.

The ED has further alleged that, “Some SSKs were indirectly sold to the then director/office-bearers of the bank, and the financial investigation in this regard raises suspicion about transparency in the auction proceedings conducted for sale of the said SSKs.”