‘PMC Bank auditors were linked to HDIL, got ₹40L-₹60L to hide NPAs’

The economic offences wing (EOW) on Tuesday produced two chartered accountants before a holiday magistrate court, seeking their custody for their involvement in

The economic offences wing (EOW) on Tuesday produced two chartered accountants before a holiday magistrate court, seeking their custody for their involvement in the ₹4,355-crore fraud case at Punjab and Maharashtra Co-operative (PMC) Bank.

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Chartered accountants Ketan Pravinchandra Lakdawala, 60, of Lakdawala & Companies and Jayesh Dhirajlal Sanghani, 61, of Ashok Jayesh & Associates were remanded in police custody till November 15.

Sources in the EOW said that Lakdawala and Sanghani, who were arrested on Monday, were “associated” with Housing Development Infrastructure Limited (HDIL) and despite this connection, PMC Bank’s managing director (MD) Joy Thomas appointed them to carry out audits. According to the EOW, Sanghani and Lakdawala may have received between ₹40 lakh-₹60 lakh individually to deliberately overlook the irregularities in the bank and hide non-performing assets (NPA) accounts of HDIL from the Reserve Bank of India (RBI).

Ashok Jayesh & Associates served as statutory auditors for PMC Bank from 2009 to 2018. Lakdawala & Companies served as auditors for the financial years of 2017-18 and 2018-19. This was the period when the alleged fraud was being carried out at PMC by senior management of the bank and HDIL. Both auditors certified the adulterated financial statements of PMC Bank as true and authentic. Both have not verified the bona fide financial position of the bank by following due diligence, an officer from the special investigation team (SIT) said.

“The auditors purposely did not follow their basic responsibilities while conducting the statutory auditing. They in connivance with bank’s [former] MD Joy Thomas, ex-chairman Waryam Singh and executives of HDIL, purposely overlooked the NPA accounts of HDIL and its associate companies,” said an EOW officer.

Both auditors have more than two decades worth of experience. During the investigation, they feigned ignorance of the alleged fraud at the bank. “We learnt that they [the accountants] were associated with HDIL and when asked about it, they did not give satisfactory answers prompting us to arrest them for custodial interrogation,” the officer added.

Another EOW officer said that they had enough to establish mens rea, or the intention or knowledge of wrongdoing that constitutes part of a crime. The police is yet to establish from whom the accused auditors received direct instructions and potentially, the money.

The Institute of Chartered Accountants of India has also initiated disciplinary action against the duo and an inquiry into the allegations levelled against the two by the EOW.