On August 22, a two-judge Bench of Justices S C Dharmadhikari and Sandeep K Shinde of the Bombay High Court ordered the Economic Offences Wing (EOW) of Mumbai Police to register an FIR against the 44 erstwhile directors of the Maharashtra State Cooperative Bank for their alleged role in the various irregularities in sanctioning of loans and financial dealings. The list includes political leaders including former Deputy Chief Minister Ajit Pawar of the NCP and Jayant Patil (PWP).
The order came on a public interest litigation (PIL) filed by Mumbai resident Surinder Arora in 2015. Arora had cited a 2009-10 annual inspection report by NABARD, an inquiry report of the Commissioner of Cooperation and the internal audit report of the bank, all of which talked of irregularities and connivance of the then board of directors in extending loans to cooperative sugar mills, spinning mills and other agri based businesses.
Why the bank is important
MSC Bank is the state’s apex cooperative bank. Its primary function is to re-finance district central cooperative banks (DCCBs) that extend agricultural credit to farmers. It also extends capital to the agri- processing units like sugar mills, spinning mills, food processing units etc. The RBI is the bank’s regulator with NABARD conducting yearly financial inspection.
Before it was dismissed, the bank was run by a board of directors who were elected from district-level cooperative bodies. The last board had 44 directors and a majority of them were elected representatives from the then ruling NCP-Congress. Leaders from other parties also had representation on the board. Since 2011, the bank is run by a board of administrator appointed by the state government.
As of March 31, 2019, the net worth of the bank is pegged at Rs 2,689.89 crore and it has savings worth Rs 15,839.87 crore. The total loan portfolio in the last financial year stood Rs 19,599.54 crore, and the bank reported a net profit of Rs 251.35 crore.
The alleged irregularities
On May 4, 2011 the RBI suspended the then board of directors and appoint administrators instead. This decision was taken in view of the inadequacies observed by NABARD during its 2009-10 annual inspection report and the abnormally high nonperforming assets of 31.2 per cent. The board of directors had denied all allegations of wrongdoing, and the dismissal started a war of words between NCP and Congress with each accusing the other.
In their 84-page judgment, the judges quoted from the NABARD report on shortfall in provisioning for NPAs, and high level of NPAs. The report had accused the board of directors of not taking discernible action for recovery in 86 cases worth Rs 2806.9 crore registered under the SARFAESI Act, 2002. It talked about the bank continuing to violate norms for providing loans, and said loans worth Rs 297.14 crore were sanctioned to eight cooperative sugar mills without securing collateral and government guarantee.
Following Arora’s PIL, the court asked the EOW to look into the complaint. On August 22, the court pulled up the EOW deputy commissioner for failure to file an FIR.
Why it matters politically
The FIR comes at a time when the state gears up to elect a new Assembly. For the NCP, the order is yet another blow as Pawar is one of its senior-most leaders. The BJP and Shiv Sena are likely to target the NCP-Congress over alleged corruption. In fact, some NCP leaders named in the FIR, such as Vijaysingh Mohite Patil, have since joined BJP, while others such as Dilip Sopal have joined the Shiv Sena.