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Madhavpura crisis was on the cards

Suresh R Menon

Though a shareholder of Madhavpura Mercantile Co-operative Bank (MMCB) had submitted a detailed complaint to the Registrar of Co-operative Societies (RCS) and the Reserve Bank of India (RBI) almost three years back alleging and highlighting irregularities, unethical practices as well as violation of RBI guidelines and other banking norms at MMCB, these authorities failed to take any concrete steps to avert the impending crisis.

Jashubhai S Patel, a businessman from Ahmedabad as well as a shareholder of MMCB, vide his 19-page letter dated April 29, 1998 (a copy of which is available with Business Standard), had specifically requested the concerned authorities "to intervene in the affairs of MMCB before the bank becomes another scam like CRB Capital".

Alleging irregularities and misuse of public deposits by MMCB chairman Ramesh Parikh and its board of directors, the complainant had, in an annexure attached to the letter, enumerated various credit-limit accounts of Madhur Food Products Ltd (MFPL) and its associate/ sister concerns, which were all given and utilised in gross violations of rules and regulations of the RBI as well as the prescribed norms for sanctioning and utilisation of credit limits.

Emphasising that these credit limits were made possible because the chairman of Madhur Food is also the chairman of Madhavpura Bank, the letter alleged that there was not sufficient stock available with the companies as security and the debts reflected the sales to associate/ sister concerns.

Referring to Madhur Food's audited accounts of 1996-97, Patel stated that Madhur Group was using funds of MMCB to the tune of around Rs 170 million, whereas the total turnover of the flagship Madhur Food was only Rs 190 million, which included the accommodation bills to associate/ sister concerns.

So definitely, it is a siphoning of the public funds for the purpose other than business purposes and it is a misappropriation/misuse of public funds, while sitting on the seat of chairman and using the powers for personal gain," the complainant had emphasised.

Alleging that the board of directors must also be working in connivance with the chairman, Patel said that "there are also utilisation of credit limits in the name of various other names, persons and concerns, who are in fact benami of the MMCB chairman Ramesh Parikh".

RBI regional director (Gujarat) V S Das said, "Yes we had received this complaint. It was thoroughly investigated and a report was sent to the Registrar of Cooperative Societies (RCS). As MMCB is under dual control of both RCS and RBI, it is for the registrar to take action on this bank. They were supposed to conduct an inquiry under section 86 of the Cooperative Societies Act.

Saying that results of such investigations are expected to be kept confidential, Das was not willing to divulge the content of the said report nor the result of the investigation.

Repeated attempts to telephonically contact the RCS R M Joshi, Joint RCS P J Bharwad and deputy RCS A B Ghadvi on Tuesday proved futile as they were said to be attending meetings at the state secretariat. Finally, when P J Bharwad could be reached on the phone, he expressed ignorance about the RBI report and disconnected the line.

Another attempt to contact and talk to him elicited an evasive reply as he said, I would have to look into the file and find out." And without bothering to listen to what this correspondent had to say, he once again disconnected the phone.

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