PMC Bank scam: SC refuses to entertain depositors’ plea for lifting restrictions on withdrawals

In a setback for account holders of scam-hit Punjab and Maharashtra Cooperative Bank, the Supreme Court has refused to entertain a plea that sought lifting of restrictions on cash withdrawals from the bank

The Supreme Court, on October 18, 2019, refused to entertain a plea filed on behalf of scam-hit Punjab and Maharashtra Cooperative (PMC) Bank account holders, seeking lifting of restrictions imposed by the Reserve Bank of India (RBI) on cash withdrawals. Advocate Shashank Sudhi, appearing for petitioner Bejon Kumar Mishra, said he filed the petition on behalf of 500 PMC Bank account holders.

A bench headed by chief justice of India Ranjan Gogoi said, “We are not inclined to entertain this petition under article 32 (writ jurisdiction). Petitioner can approach the high court concerned for appropriate relief.”


PMC Bank’s ex-director sent to police remand

In a related development, the Mumbai police’s Economic Offences Wing (EOW), which is probing the scam, told a court that the bank’s former director Surjit Singh Arora ‘abused his official position to facilitate the fraud’. Arora was, on October 17, 2019, produced before additional chief metropolitan magistrate SG Shaikh, who remanded him in police custody till October 22, 2019. Arora is the fifth accused to be arrested in the case.

The EOW said Arora was the director and key member of the loan committee of the bank until its affairs were taken over by the RBI. “Arora was elected on the directors’ body to ensure proper functioning of the bank. However, he abused his official position to facilitate the fraud,” it said. The court also remanded the bank’s former managing director Joy Thomas in 14-day judicial custody, after his police remand ended on October 17, 2019.


HDIL-PMC Bank scam: SC agrees to hear plea seeking measures to safeguard depositors’ money

The Supreme Court has agreed to hear a plea that has sought relief measures to safeguard the money of customers who have been hit by the HDIL-PMC Bank crisis

October 17, 2019: As crisis-hit PMC bank depositors intensified their protests, the Supreme Court has agreed to hear, on October 18, 2019, an urgent plea seeking directions for interim measures, to safeguard the money of customers blocked in the bank. The plea, on October 16, 2019, for the apex court to step in amid three deaths linked to the crisis in the Punjab and Maharashtra Cooperative(PMC) Bank, came even as the bank’s administrator met the RBI’s top brass including governor Shaktikanta Das and assured depositors that all efforts will be made to safeguard their interests.

The petition, filed by Delhi-based Bejon Kumar Misra, sought a direction for issuance of ‘exhaustive and comprehensive guideline’, to safeguard the banking and cooperative deposits in the eventuality of emergency financial crisis, where citizens are financially stranded by the acts of a few ‘unscrupulous persons’. It claimed the bank had 15 lakh depositors. The petition, has also sought quashing of the RBI notification restricting the limit of withdrawal of the deposits.


Probe agencies seek custody of top brass

In a related development, a Mumbai court remanded Housing Development and Infrastructure Ltd’s (HDIL’s) chairman and managing director Rakesh Wadhawan, his son Sarang Wadhawan and PMC Bank’s former chairman Waryam Singh to judicial custody till October 23, 2019, in connection with the scam. The Enforcement Directorate (ED) has also approached a special court for Prevention of Money Laundering Act (PMLA) cases, seeking the Wadhawans’ custody, for the probe into the money laundering case that the central agency has registered in the PMC Bank scam.

The Mumbai police also said that it will investigate how the Reserve Bank of India (RBI) audit missed various irregularities in the PMC Bank transactions. Mumbai police commissioner Sanjay Barve said the police are looking into why and how these irregularities in the functioning of the bank did not figure in the RBI’s forensic audit report. “In normal course, an audit by the RBI or cooperatives, should reveal such irregularities. We are looking into this aspect as to how and why the audits did not reveal these things,” he added.


HDIL promoters offer to sell assets, to repay dues

Meanwhile, the promoters of real estate group HDIL, Rakesh and Sarang Wadhawan, have requested the RBI and investigation agencies to sell off their assets, to pay off the bank’s dues. In a letter to the ED, the union Finance Ministry and the RBI, the Wadhawans requested that they be allowed to sell off 18 of their attached assets. The letter was released by a spokesperson of the Wadhawans. “It is in the larger public interest that the assets are disposed of, so as to mitigate the present situation,” said the letter.


PMC Bank crisis: RBI enhances withdrawal limit to Rs 40,000

While the RBI has moved to increase the withdrawal limit for PMC Bank’s customers to Rs 40,000 per account, the ED has said that it has seized and identified assets worth Rs 3,830 crores, in connection with its money laundering probe

October 15, 2019: In a development that is likely to provide relief to the customers of troubled Punjab and Maharashtra Cooperative (PMC) Bank, the Reserve Bank of India (RBI), on October 14, 2019, enhanced the withdrawal limit to Rs 40,000 per account, from Rs 25,000 per account earlier, for six months. With this relaxation, about 77% of the depositors of the bank will be able to withdraw their entire account balance, it said. This is the third time the regulator has increased the withdrawal limit, since it clamped down on PMC Bank on September 23, capping withdrawals at Rs 1,000 per customer, which led to a lot of distress and criticism. Finance minister Nirmala Sitharaman also said she is closely monitoring the developments at PMC Bank, while the RBI governor assured that customers’ interest would be protected.

Meanwhile, the Enforcement Directorate (ED) said that it was in the process of conducting valuation of a number of properties of Housing Development and Infrastructure Limited (HDIL), its directors, promoters, Punjab and Maharashtra Cooperative (PMC) Bank officials and others, as part of its investigation into the PMC Bank money laundering case. The assets, both immovable and movable, will be attached under provisions of the Prevention of Money Laundering Act (PMLA) after valuation, it said.

“The total value of movable and immovable assets seized, frozen and identified by the ED, being the proceeds of crime in this case, is more than Rs 3,830 crores, which does not include value of 80 unencumbered properties around Mumbai. Further probe is in progress, to identify and locate the balance proceeds of crime,” the ED said, in a statement.

The central agency said that raids conducted earlier, led to the recovery of ‘incriminating documents’ that revealed instances of siphoning of funds and their misuse. The seized and frozen assets include high-end cars, two aircrafts, jewellery, a speedboat, a yacht and fixed deposits. The agency said it has also identified a number of costly properties for attachment under the PMLA.


FM assures PMC depositors of necessary steps for better cooperative banks’ governance

The government has announced that it will set up a panel, which will recommend changes in the laws, if necessary, to prevent scams like the one at PMC Bank

October 11, 2019: Finance minister Nirmala Sitharaman, who faced angry depositors of scam-hit Punjab and Maharashtra Cooperative (PMC) Bank on October 10, 2019, announced the setting up of a panel to recommend legislative changes, to ensure better governance at cooperative banks. If necessary, the government will amend the laws governing cooperative banks in the winter session of parliament, she said at a press conference.

Sitharaman said a committee of secretaries of Economic Affairs and Financial Services, Rural Affairs and Urban Development ministries and a deputy governor of the RBI would be formed. Through this committee, the government intends to ‘understand and take necessary legislative steps, to prevent such things from happening in the future and empower the regulator better’, she said. Concerns exist about cooperative banks often becoming fiefdoms of politicians or other influential persons, giving a go-by to banking regulations and leading to soaring bad loans and putting in peril depositors’ money. Irate depositors gathered outside the BJP’s office in south Mumbai ahead of Sitharaman’s press conference. “Sixteen lakh depositors are in distress. What is our fault? You have got Rs 4,000 crores assets. Sell it and start the bank and then, go ahead with whatever action you want against the accused,” said Harbans Singh, a bank customer.


PMC Bank created over 21,000 fake accounts, to hide defaults by HDIL: EOW

Punjab and Maharashtra Cooperative Bank replaced 44 loan accounts of the HDIL Group, with over 21,000 fictitious loan accounts and thus camouflaged defaults by the Group, the EOW has informed

October 7, 2019: In the details of loan accounts submitted to the Reserve Bank of India for the year ended March 31, 2018, the Punjab and Maharashtra Cooperative (PMC) Bank replaced 44 loan accounts of HDIL and its group of companies, whose outstanding balance were significantly higher, with 21,049 fictitious loan accounts,” the Economic Offences Wing (EOW) of the Mumbai police said. The EOW disclosed the information, while seeking custody of chairman and managing director of Housing Development and Infrastructure Ltd (HDIL) Rakesh Wadhawan and his son Sarang. The court remanded them in police (EOW) custody till October 9, 2019.

These loans were not recorded in core banking system. Instead, they were mere entries in the ‘master indent’ (details of loan accounts) submitted to the RBI for inspection, the EOW said. The bank’s board of directors and executives, including managing director Joy Thomas, had ‘full knowledge’ of this act, it said Thomas was arrested on October 4, 2019. Through this forgery, bank officials ‘camouflaged’ the real loan accounts of defaulters (HDIL Group), the EOW said.


HDIL crisis: 2 directors arrested, assets worth Rs 3,500 crores frozen, in PMC Bank scam case

The Mumbai police has arrested two directors of HDIL in the Punjab and Maharashtra Cooperative Bank scam and also seized property worth Rs 3,500 crores of the company

October 4, 2019: A special investigation team of the Economic Offences Wing (EOW), on October 3, 2019, arrested two directors of Housing Development Infrastructure Limited (HDIL) – the chairman and managing director Rakesh Wadhawan and his son Sarang Wadhawan – for loan default in the Punjab and Maharashtra Cooperative (PMC) Bank scam, a senior official said. Both the accused were called by the EOW office to join the investigation, he said. During their inquiry, the police did not get satisfactory answers to specific questions, following which both were arrested, on the basis of certain facts which surfaced during the investigation, the official said.

Properties worth around Rs 3,500 crores, belonging to HDIL, have also been frozen by the EOW, he said. The police are collecting more information about the scam and interrogation of the arrested father-son duo is going on, he said. All those involved in this case will be called for a inquiry, he added. As many as 44 bank accounts of HDIL and associate companies have been identified, the official said. The corporate office of HDIL at Bandra and the Bhandup branch of PMC in Mumbai, were searched by the EOW, he said, adding that some important documents were seized.

Meanwhile, the ED, on October 4, 2019, raided six locations in Mumbai and its adjoining areas and registered a money-laundering case, to probe the alleged fraud in the PMC Bank case, officials said. They said the raids were being conducted, after a criminal complaint was filed under the Prevention of Money Laundering Act by the central agency. The raids are aimed at gathering additional evidence, ED sources said.

The EOW had registered an FIR, on September 30, 2019, against senior officials of HDIL and the PMC Bank for allegedly causing losses to the tune of Rs 4,355.43 crores to the bank. The FIR was filed under Section 409 (criminal breach of trust by a public servant or banker), 420 (cheating), and 465, 466 and 471 (related to forgery) of the Indian Penal Code along with 120 (b) (criminal conspiracy), he said.


HDIL crisis: Look out circular issued against MD, director

The government has issued a look out circular against two directors of realty firm HDIL, after preliminary findings allegedly revealed financial irregularities at the company

October 1, 2019: The government has issued a look out circular against real estate firm HDIL’s managing director Sarang Wadhawan and whole time director Rakesh Kumar Wadhawan, a senior official has revealed. The move follows a request by the Ministry of Corporate Affairs, which has been made operational by the Bureau of Immigration that comes under the Ministry of Home Affairs, the official added. Further, the official said the circular has been issued against the two directors, based on a preliminary report received from the field office of the Corporate Affairs Ministry. A look out circular is issued against a person, directing the immigration authorities to ensure that he or she does not leave India, through an airport or seaport.

HDIL is also embroiled in the crisis at Punjab and Maharashtra Cooperative (PMC) Bank, which has extended substantial amount of loans to the company. PMC’s exposure to HDIL Group is nearly 73% of its total loan book size of Rs 8,880 crores, as of September 19, 2019, a source had said, on September 29, 2019. In an alleged confession letter to the Reserve Bank of India (RBI), the bank’s suspended managing director Joy Thomas had accepted giving loans to realty developer HDIL and its related entity, to the tune of Rs 6,500 crores, without informing all the board members.

HDIL has also been dragged to the insolvency court, by Bank of India, for its failure to repay Rs 522 crores. On September 3, 2019, the National Company Law Appellate Tribunal (NCLAT) stayed the constitution of a committee of creditors, after HDIL filed a plea against the National Company Law Tribunal’s (NCLT’s) order, to commence insolvency proceedings against it. The company also faces resolution pleas under the Insolvency and Bankruptcy Code (IBC), filed by Syndicate Bank, Corporation Bank, Dena Bank and Indian Bank. In 2018, HDIL had settled bankruptcy petitions filed by Jammu & Kashmir Bank and Andhra Bank.

Currently, HDIL is developing various projects at Kurla, Nahur, Mulund and Palghar and has a residential portfolio of 86.22 lakh sq ft under construction. It has a land reserve of around 193 million sq ft, as on March 31, 2019, with 90% of its land reserves in the Mumbai Metropolitan Region (MMR), as per the 2018-19 annual report. Incorporated in 1996, Mumbai-based HDIL mainly focused on real estate development in the MMR, which included clearing slum land and rehabilitating slum dwellers. The main source of revenue of HDIL, for long, has been selling of development rights to other property developers, after developing the slum land. The company reported a revenue of Rs 601.20 crores in FY19 and a net profit of Rs 96.19 crores.


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