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Journalism of Courage
Mumbai Police on Friday arrested Joy Thomas, the suspended managing director of the Punjab and Maharashtra Co-operative (PMC) Bank for causing a loss of Rs 4,355.46 crore to the bank by giving loans to the HDIL group.
Thomas, who was named as an accused in the FIR filed by the Economic Offences Wing (EOW) of Mumbai Police on Monday, was arrested in Mumbai. He was booked for committing criminal breach of trust, cheating, forgery and being part of a criminal conspiracy under the Indian Penal Code.
The Mumbai native joined the bank in the mid-80s at a junior level, when it had just one branch and steadily rose through the ranks. EOW officials said that he owns at least four properties in Mumbai and neighbouring suburbs.
After the FIR was registered, the EOW sent notices to Singh and bank chairman Waryam Singh to participate in the investigation. Singh is still at large. A senior EOW official said that he has not been found at locations they expected him to be.
He, along with bank executives and the board of directors, is accused of providing false reports to the Reserve Bank of India (RBI) regarding the loan accounts of HDIL.
According to police, in the details of the loan accounts provided to the RBI by the bank on August 31, 2018, Thomas replaced 44 loan accounts held by HDIL and its group companies with 21,049 fictitious loan accounts.
These fictitious accounts, said police, were not created in the bank’s Core Banking System (CBS) but were instead only entries in the report submitted to the RBI for its inspection.
“By doing this, with the full knowledge of its Board of Directors and executives, including MD Joy Thomas, the bank camouflaged the actual loan accounts of the defaulting borrowers to the detriment of the bank and depositors’ interests,” police informed a court on Friday.
According to a preliminary inspection by the RBI, an account held by HDIL promoter Rakesh Kumar Wadhawan has an outstanding balance of Rs 2,008.62 crore as of August 31, 2019, while an account held in the name of the firm owes the bank Rs 1367.55 crore. An account held by Sarang Wadhawan, a fellow promoter and son of the elder Wadhawan, has outstanding dues of Rs 137.16 crore.
The EOW arrested the father and son duo on Thursday and produced them in court on Friday afternoon. The Magistrate remanded them to police custody till October 9.
Police argued that the custody of the Wadhawans was required as the funds they had availed from PMC bank “had not been utilised for the designated purpose of borrowings”.
An initial scrutiny of the firm’s financial statements indicates “diversion and misappropriation of funds in large amounts,” police told the court.
Senior counsel Amit Desai, who appeared for the Wadhawans, argued that his clients wanted to pay back the money taken from the bank. He added that the custodial interrogation of the Wadhawans was not necessary as HDIL’s land parcels, fixed deposits, books of accounts and other documents were available with the bank. Desai further argued that remanding the duo to police custody would harm the corporate insolvency proceedings against HDIL, underway at the National Company Law Tribunal.
According to the EOW, a thorough probe is also required to establish whether the PMC Bank funds were used by HDIL to pay back loans it had availed from other banks. A senior police official said that such “evergreening of loans” is common when loans are taken from other banks in order to pay off earlier loans.
