Over three months after three senior officials of the state-owned Bank of Maharashtra (BoM), including its CMD, were arrested by the Economic Offences Wing (EOW) of Pune police in a case involving the city-based DSK Group, which has allegedly cheated thousands of depositors, Pune police have filed a closure report, saying the officials had sanctioned loans as part of “normal banking transaction”.
The three BoM officials – Ravindra Marathe (CMD), Rajendra Gupta (Executive Director) and Sushil Muhnoot (former CMD) – were arrested on June 20, leading to protests by the banking industry and prompting senior government officials in New Delhi to step in and engage with the Maharashtra government as such cases are referred to and handled by the CBI. “We have filed a closure report under Section 169 of the CrPC as we haven’t found any evidence against the three bank officials,” Pune police commissioner K Venkatesham told The Indian Express. “However, we have sent a detailed report to the department of financial services so that they can probe if there were any irregularities committed by the three officials,” Venkatesham said.
In October last year, Pune police registered a case of cheating and forgery against Deepak Kulkarni, Hemanti Kulkarni and Shirish Kulkarni of the DSK Group along with certain sections of the MPID Act. According to police, the accused allegedly had committed fraud to the tune of Rs 2,043.18 crore, which includes Rs 1,083.7 crore taken as deposits and loans from depositors, Rs 711.36 crore of loans taken from banks and financial institutions, Rs 111.35 crore of debentures and Rs 136.77 crore of misappropriations in a land deal at Fursungi.
Deepak and Hemanti were arrested in February this year. They are currently lodged at Pune’s Yerawada jail. Police filed a chargesheet against the two in May this year.
According to police, a loan of Rs 600 crore was raised by D S Kulkarni Developers Limited (DSKDL) to finance its project – DSK dream city in Pune – by a consortium of six banks led by the State Bank of India (Rs 200 crore). The other five banks included Union Bank of India (Rs 100 crore), Bank of Maharashtra (Rs 100 crore), IDBI Bank (Rs 75 crore), Syndicate Bank (Rs 100 crore) and Vijaya Bank (Rs 25 crore). These banks held their first meeting on March 5, 2015 when it was decided to sanction the loan amount to DSKDL.
According to the closure report accessed by The Indian Express, in February 2016, BoM’s credit approval committee approved a loan of Rs 100 crore to the company on the condition that, “sanctioned facility shall be released only after full tie up of required debt/financial closure”, is met. “However on March 19, 2016, the committee, headed by then CMD Sushil Muhnoot and which included BoM Executive Director Rajendra Gupta as its member, made changes to the credit approval conditions and allowed Rs 50 crore to be disbursed, which was disbursed on March 22, 2016,” the report states.
“However, the company started defaulting on payments. When the consortium met on February 3, 2017, it was of the view that “progress of the phase I of the work and infrastructure is at low level than estimate loans of all consortium banks is in Special Mention Account Category-2 or SMA-2 category. hence joint lenders forum has been treated as formed as on date. Corrective action plan was accepted by all banks and the company was asked to submit clear recovery plan,” the report said.
Talking on the alleged role of the bank officials, the report mentions, “However, despite RBI circulars clearly stating that after a joint lender forum is formed, any fresh loan can be given only after the approval of the consortium, the credit committee of BoM on April 7, 2017 approved a short-term loan of Rs 10 crore, “to meet temporary mismatch in cash flows”. In the same meeting, Rs 20 crore cash credit, Rs 9 crore bank guarantee and the remaining Rs 38.92 crore of the previously sanctioned Rs 100 crore were renewed,” the report states. “Since the bank officials failed to give satisfactory answers on why they sanctioned the loans to the company, three officials of BoM namely Ravindra Marathe, CMD, Rajendra Gupta, Executive Director, and Sushil Muhnoot, former CMD, were arrested on June 20. All the three are currently out on bail,” the closure report says.
While spelling out the reason for giving a clean chit to the officials, the report states, “During the course of the probe, it was learnt that the BoM credit committee whose members were Muhnoot and Gupta approved the sanction of Rs 50 crore after it was brought to their notice that three banks including the lead bank, SBI, had released a total amount of Rs 150.48 crore in total – SBI Rs 72.57 crore, Syndicate Bank Rs 36.91 crore and Union Bank of India Rs 41 crore.”
On Marathe who was appointed as the CMD in September 2016 and was heading the credit committee, the closure report states, “While sanctioning the short term loan, it was found that DSKDL Rs 236.53 crore was NPA of the total term loan of Rs 5,063.94 crore, no NPA in the short term loan of Rs 18 crore availed by the company, Rs 271.14 crore NPA of the total cash credit of Rs 2,204.84 crore and Rs 182.96 crore NPA of total bank guarantee of Rs 1,055.66 crore. DSK Group had 109 accounts with BoM. Also in the past, a loan of Rs 82 crore availed by DSK was paid off. Taking all these factors into account, the credit committee headed by Marathe decided to sanction a short term loan of Rs 10 crore,” the report mentions.
“The probe also states that BoM had started an inquiry under SARFAESI Act, 2002 and also took possession of the land mortgaged by the company. the probe has revealed that the arrested bank officials did not sanction the loan for any bribe or to willingly cause any wrongful loss to the bank,” the report states. “All the loan sanctioned to the company were a part of the ‘normal banking transaction’ and the officials did not extend any extra privilege to the company… that the accused are involved in the scam committed by the company has not been proven,” it further mentions.
“No evidence has been found that the accused committed the crime under the IPC and MIPD sections invoked against them. The bank officials are not involved in the fraud caused by DSKDL and neither did they make any forged documents to help the company. the bank officials didn’t connive with the company to cause loss to the depositors but only took imprudent business decisions and had complied according to the norms set by RBI and central government,” the report said.
Senior advocate Harshad Nimbalkar and advocate Shailesh Maske, who represented the bankers during the bail hearing, said the court will decide the matter on November 3. “During the bail hearing, we had brought all these facts before the court,” Nimbalkar said. “The police acted in haste and unnecessarily arrested the bank officers who were only performing their duties. The court has accepted the police’s application and will give its order on November 3,” Maske said.
Public prosecutor Pravin Chavan said he was not informed by police of its decision to file a closure report against the bank officials. “My opinion was not sought even while they were placed under arrest. On Saturday I learnt that police has filed a closure report, however the report wasn’t shared with me,” Chavan told The Indian Express.
Chavan said the court will hear the complainant and the public prosecutor before giving its order. “A depositor is a complainant in the case. His and mine statement would be taken and the evidence shared by police would be examined before the court takes a decision to discharge them,” Chavan said.