Rs 25,000-cr scam: ED books Sharad Pawar, nephew for money laundering

The probe agency said that loans were sanctioned to CSF despite weak financial and negative network

The Enforcement Directorate (ED) has registered a money laundering case against Nationalist Congress Party (NCP) chief Sharad Pawar, nephew Ajit Pawar and several former directors of Maharashtra State Co-operative Bank in connection with a Rs 25,000-crore loan scam.

The setback for the Pawars comes a month before Maharashtra goes to the polls. The NCP had won 41 seats in the 2014 Assembly elections.

According to the probe agency, loans were provided to cooperative sugar factories (CSFs) in connivance with then senior officials of the co-operative bank with the purpose of siphoning off money, causing a huge loss to the bank.

“There were several irregularities in the sanctioning of loans… only with the purpose of extending benefits to the directors of the lending bank, for personal gains,” the ED said. These loans were sanctioned between 2007 and 2010.

Explaining the modus operandi, the probe agency said loans were sanctioned to CSFs despite weak financials and negative net worth. No collateral was taken in many cases, and credit was extended based on incorrect representation made by the bank. The bank even extended additional working facilities to certain sugar factories without having any prudent reason.

It said that because of alleged mismanagement and under-utilisation of the capacity and increasing overhead expenditure, these factories became sick and were sold at a price much below the reserve price to help the purchasers get wrongful gains.

The ED alleged that the buyers had political links and personally knew the directors on the boards of the CSFs, and the consent of the borrowing units was not taken before undertaking the sale, indicating wrong intention on the part of the board.

The federal agency has evidence showing that forged documents like a sale certificate were made in some instances in which the actual sale (based on the sale deed) was done at a much lower level that what was mentioned in the sale deed. It also observed that no rule was followed to fix the reserve price. The price was decided on the basis of the interest of the purchaser, be it market value or distress value of the property. Also, the sale was carried out without inviting the tender.

“The director flouted various bank and Reserve Bank of India regulations by sanctioning illegal loans, giving loans to the related parties without disclosing it to the bank. Selling off units at throwaway prices to relatives. There were huge misappropriation of funds on part of the committee members, directors and the loan committee members of the state cooperative bank,” the ED noted.

The ED registered the case on Monday based on the first information report filed by the Economic Offence Wing of the police in Mumbai. A criminal public interest litigation was filed in the Bombay High Court early this year alleging several irregularities in the bank’s loan sanctioning process.