Mumbai Police’s Economic Offences Wing conducts raids over PMC Bank case

Officials from the Economic Offences Wing (EOW) of Mumbai Police on Tuesday raided the Bandra office of Housing Development Infrastructure Limited (HDIL) and the

Officials from the Economic Offences Wing (EOW) of Mumbai Police on Tuesday raided the Bandra office of Housing Development Infrastructure Limited (HDIL) and the Bhandup branch of Punjab and Maharashtra Co-operative (PMC) Bank. The EOW has also asked that a forensic auditor be appointed in this case, which is so far the biggest banking fraud case of 2019.

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Prima facie, it seems executives of PMC Bank in connivance with HDIL’s top brass and others intentionally concealed information from the Reserve Bank of India (RBI) on the bank’s non-performing assets (NPAs) for at least a decade; and created small, false loan accounts to cover up their irregularities. “Many documents pertaining to the transactions related to the fraudulent loan availing and other important documents have been seized during the raids on Tuesday,” said joint commissioner of police (EOW) Rajvardhan Sinha.

EOW sources said that the initial probe by the RBI revealed that directors of PMC Bank in connivance with others, had replaced suspicious 44 loan accounts with 20,149 fictitious bank accounts whose individual balances were low. “The amount of actual fraud by unlawfully availing loans from PMC Bank may increase in the future as ₹4,355 crore [the current valuation of the fraud] is only connected to 10 accounts belonging to the HDIL group of companies,” said a senior EOW official. There are 34 more suspicious borrowers’ accounts and their details are awaited.

According to the FIR filed yesterday, PMC Bank’s board of directors and former managing director Joy Thomas had camouflaged actual loan accounts of defaulters, resulting in wrongful gain to the HDIL group of companies. HDIL accounted for nearly 73% of the bank’s total loan book. Out of the ₹4355.46 crore loans under the scanner, around ₹2145.78 crore were transferred to accounts held by Rakesh Kumar Wadhawan and Sarang Wadhawan, promoters of HDIL. An account belonging to Rakesh Kumar Wadhawan had a balance of ₹2008.62 crore on August 31, 2019, says the FIR (HT has a copy).

Eight of HDIL’s companies are named in the alleged fraud and their accounts had a total balance of ₹4,355 crore in March. The companies are Somerset Constructions Pvt Ltd, Serveall Construction Pvt Ltd, Saphhire Land Development Pvt Ltd, Emrald Realtors Pvt Ltd, Awas Developers and Constructions Pvt Ltd, Prithvi Realtors and Hotels Pvt Ltd, and Satyam Realtors Pvt Ltd.

Sarang Kumar Wadhwan, vice-chairperson and managing director of HDIL, issued a statement in which he said, “We shall take all necessary steps and extend our full cooperation with any and all agencies/authorities during this period.”

A senior EOW official said that an official request had been made to the RBI-appointed administrator to appoint a forensic auditor. A forensic audit is detailed examination of a company’s financial records that can be used as evidence in a court of law. “The forensic auditor’s report will help us ascertain the end beneficiaries of the fraud and accordingly, documentary evidence would be collected to corroborate the findings of the audit,” said the official.

On September 23, RBI had taken the unusual step of limiting withdrawals from PMC Bank, which led to panic among the depositors. The cash withdrawal limit, which was initially capped at ₹1,000 per account, was raised to ₹10,000 later. On Monday, the police filed an FIR and charged the bank’s former management and HDIL promoters for forgery and criminal breach of trust