Mumbai police file FIR in PMC Bank fraud case; ED may initiate probe soon

Police to set up SIT team, hire forensic auditor

A first information report was registered against Punjab and Maharashtra Co-operative Bank Chairman S Waryam Singh, office-bearers, suspended managing director Joy Thomas, Housing Development & Infrastructure (HDIL), its associate firms and promoters Rakesh and Sarang Wadhawan, among others, by the economic offences wing (EoW) of the Mumbai Police on Monday. 

A look out notice has also been issued against Thomas, sources told Business Standard. According to a PTI report, a lookout circular was also issued against Wadhawans. 

The Enforcement Directorate is likely to register a case under the Prevention of Money Laundering Act in the next few days based on the FIR, sources said. The case filed is a base offence under money laundering, said an ED official.

In the EoW case, the accused have been charged under Sections 409 (breach of trust), 420 (cheating), 465 (forgery), 466 (aggravated form of forgery), 471 (using a forged document as genuine), and 120 (B) (criminal conspiracy) of the Indian Penal Code.

The EoW has formed a special investigation team to probe the matter. The FIR was lodged following a complaint by the Reserve Bank of India (RBI) appointed administrator of PMC Bank for financial irregularities at the lender. 

Separately, the police will appoint a forensic auditor to study the money trail and a legal advisor for carrying the probe further.

The FIR filed by the administrator said Thomas, other functionaries including the board of the directors and bank executives, and promoters of HDIL connived to commit illegal acts. The FIR reveals the bank had replaced 44 loan accounts of HDIL with 21,049 fictitious loan accounts. These 21,049 were actually not created in the core banking solution of the bank, but were mere entities in the advances master indent submitted to RBI for conducting its inspection for the year ended March 2018.  The FIR goes on to say that loans given to HDIL were intentionally given to cause wrongful gain to HDIL and its promoters at the cost of loss to the banks and its depositors.

(Left to right) PMC Bank’s suspended MD Joy Thomas, Chairman S Waryam Singh, and HDIL promoters Rakesh and Sarang Wadhawan named in FIR

The actual financial position of the bank was camouflaged and the bank deceptively displayed a rosy picture of its financial parameters, the FIR said. 

The prima facie loss to the bank is estimated at Rs 4,355.46 crore.

A police official said, given the complex nature of the irregularities and the amount involved, the timeline for the probe will be shaped by the forensic audit report. As of September, PMC Bank’s exposure to HDIL is Rs 6,266 crore.

In a five-page letter to the RBI, Thomas had admitted to falsifying accounts, wherein he created dummy accounts to hide the defaulting accounts of realty developer HDIL. Thomas admitted that the bank did not classify the accounts of HDIL as non-performing assets and maintained them as standard accounts despite HDIL defaulting. Thomas also described the relation of HDIL’s promoter family Wadhawan with PMC Bank in detail, and how both sides helped each other out through three decades. Moreover, despite defaulting on payments, PMC Bank continued to give loans to HDIL to keep it out of the insolvency process. Bank of India has dragged HDIL into insolvency for non-payment of dues.

Following irregularities at the bank, the RBI placed curbs on the activities of the Mumbai-based bank for six months. Initially, the regulator had capped withdrawals by depositors at Rs 1,000 per account. The limit was later raised to Rs 10,000.