The Indian Bank lost Rs 1,300 crore of loans given to untrustworthy borrowers. M. Gopalakrishnan, then the chairman, of the bank was held responsible
After that the agency will have to counter the pulls from the Government of which the TMC is a key component. Whether the CBI can buck these pressures and nail the guilty is the big question.A.R. Marimuthu, a senior TMC leader, obtained Rs 1.5 crore for his factory ARM-Cardboard & Paper Industries Pvt Ltd near Chinglepattu in 1989. The loan was given without any project appraisal and has not yet been repaid.
N.S.V. Sidhan, a TMC MP from Dindigul, received Rs 4 crore for his cycle-tyre industry at Thirumangalam in 1990. The industry has closed down and the loan has yet to be recovered.
But to establish criminality in the transactions, evidence other than commercial loss is required. Once the relevant documents are accessed through the Finance Ministry, the CBI should be able to come up with clinching evidence to prove Gopalakrishnan's nexus with politicians and the alleged quid pro quo.
It is being described as a scandal which can shake the United Front (UF) government to its foundations.
The Indian Bank case, involving the sanction of irrecoverable loans to the tune of Rs 1,336 crore during M. Gopalakrishnan's tenure as chairman and managing director (CMD) from 1988 to 1995, threatens to become a political millstone for the DMK-TMC combine in Tamil Nadu and the UF Government at the Centre.
The alliance trounced the AIADMK in this year's general election primarily on an anti-corruption platform by targeting Jayalalitha and her associates. Should the investigations be allowed to proceed without intereference, and if several leading lights are indicted, the repercussions for Tamil Nadu politics would be serious. By all indications, the fallout will be as huge as the amounts involved.
The 90-year-old Indian Bank, which has a network of nearly 1,500 branches in India and a presence in Singapore and Colombo, showed a loss of Rs 1,727 crore for 1995-96, the biggest in the country's banking history, which has wiped out the bank's entire capital base. Ranked sixth among the country's 19 nationalised banks, the Indian bank showed deposits of Rs 12,431 crore in August this year.
The 90-year-old Indian Bank, which has a network of nearly 1,500 branches in India and a presence in Singapore and Colombo, showed a loss of Rs 1,727 crore for 1995-96, the biggest in the country's banking history, which has wiped out the bank's entire capital base. Ranked sixth among the country's 19 nationalised banks, the Indian bank showed deposits of Rs 12,431 crore in August this year.
The nervousness in political circles is palpable. On November 14, Prime Minister H.D. Deve Gowda personally conveyed to CBI Director Joginder Singh Finance Minister P. Chidambaram's displeasure at the CBI's action against T.P. Karunandan, the Indian Bank's executive director.
Deve Gowda reportedly pulled up Singh for violating what is called the Single Directive - a procedural norm laid down by the Ministry of Personnel which prohibits the agency from initiating action against officials above the post of a joint secretary without prior sanction by the concerned ministry.
While political pressure is bound to be exerted on the CBI for a case of this magnitude, what is intriguing in this elaborate and highly dubious loan 'mela' that the Indian Bank was involved in between 1988 and 1995 is that most of the beneficiaries are politicians from Tamil Nadu who now belong to the Tamil Maanila Congress (TMC), a party floated by a breakaway group of the Congress before the general election.
While political pressure is bound to be exerted on the CBI for a case of this magnitude, what is intriguing in this elaborate and highly dubious loan 'mela' that the Indian Bank was involved in between 1988 and 1995 is that most of the beneficiaries are politicians from Tamil Nadu who now belong to the Tamil Maanila Congress (TMC), a party floated by a breakaway group of the Congress before the general election.
And as more details become available, there is one crucial figure at whom the needle of suspicion points: G.K. Moopanar, founder-president of the party.
Most of the beneficiaries belonged to the Moopanar faction in the Congress and moved over with him when the split occurred. The tentacles of the Moopanar-Gopalakrishnan nexus were spread wide and most of the loans that were randomly granted can be linked to them.
Most of the beneficiaries belonged to the Moopanar faction in the Congress and moved over with him when the split occurred. The tentacles of the Moopanar-Gopalakrishnan nexus were spread wide and most of the loans that were randomly granted can be linked to them.
There is one evidence of Moopanar's direct involvement too. The CBI is at present scrutinising the charge that Moopanar's brother-in-law, Soundaraja Moopanar, was sanctioned a loan of Rs 2 crore in 1988 by the Bank of Thanjavur for starting a chemical industry near Karaikudi.
In July 1992, the Bank of Thanjavur, which had Moopanar's brothers Rangasami and Sampath as directors, merged with the Indian Bank.
The carry-forward losses of the Thanjavur Bank amounted to Rs 50 crore at the time of the merger. The same year Gopalakrishnan moved a waiver proposal to write off the Rs 2 crore loan to Soundaraja Moopanar.
While Moopanar declined to speak to India Today, he has in the past publicly admitted to making recommendations for numerous loans to Gopalakrishnan.
Perhaps the initial leads regarding the possible involvement of politicians in the scam came from Gopalakrishnan himself.
Perhaps the initial leads regarding the possible involvement of politicians in the scam came from Gopalakrishnan himself.
Arrested along with four other senior bank employees on September 25 this year, Gopalakrishnan was known to openly flaunt his closeness to senior TMC leader Moopanar and "old association" with Finance Minister P. Chidambaram. CBI officials say that the former CMD, still in custody, admitted that his links with politicians had helped him in his career.
This was no empty claim. A confidential RBI note on Gopalakrishnan's tenure details how the high-profile banker was granted an unprecedented seven extensions in his seven-year stint as CMD.
This was no empty claim. A confidential RBI note on Gopalakrishnan's tenure details how the high-profile banker was granted an unprecedented seven extensions in his seven-year stint as CMD.
So much so, that on December 6, 1994, the appointments committee, Ministry of Finance, received a communication from the Prime Minister's Office stating that "the PM P. V. Narasimha Rao has directed that Gopalakrishnan may continue as CMD till further orders". This, despite the fact that the CBI had moved the Finance Ministry for sanction to investigate Gopalakrishnan since 1992.
While the RBI had been frowning upon the former CMD's profligate lending approach in unconventional areas - real estate, media outfits, private healthcare and education since 1992 - no substantive evidence of mala fide intent came out.
While the RBI had been frowning upon the former CMD's profligate lending approach in unconventional areas - real estate, media outfits, private healthcare and education since 1992 - no substantive evidence of mala fide intent came out.
Suspicions about the flamboyant Gopalakrishnan's political links grew when he joined the TMC as an "ordinary worker" soon after his retirement in April this year. TMC spokesman S.G. Vinayaga Moorthy has tried to sidetrack the political baptism of Gopalakrishnan by saying, "We did not invite Gopalakrishnan to join the TMC. He did it on his own accord and without making any demands".
Such disclaimers are unlikely to discourage the CBI from adopting a hard line. "The Single Directive is a handicap," says Singh. "Nowhere does the criminal procedure code lay down any such restrictions, and nobody can find fault with the merits of my case." The Government's stonewalling apart, the agency faces numerous technical impediments in investigating the case.
The RBI, for one, is yet to provide the CBI with the report of a confidential Indian Bank audit done by a private firm in July 1992, as well as its own inspection notes pertaining to the bank for the period 1988 to '95.
Still, the CBI's dossier on Gopalakrishnan is thickening by the day. The agency's Mumbai-based bank securities and fraud cell (BSFC) has now registered three other cases against the Indian Bank officials and half a dozen more will follow.
"It is an extraordinary situation," says a senior CBI official, "the appraisal-disbursal system has been blatantly violated, and in almost every case credit proposals have come from the CMD."
Take the case of M. Varadarajalu, an NRI, whose company MVR Exports received loans worth Rs 350 crore and was probably the single-largest beneficiary of Gopalakrishnan's largesse. Similarly, East-West Travel & Trade Links Ltd, a subsidiary of the East West Airlines, was sanctioned an overdraft of Rs 3.75 crore at the CMD's behest in September 1989.
Take the case of M. Varadarajalu, an NRI, whose company MVR Exports received loans worth Rs 350 crore and was probably the single-largest beneficiary of Gopalakrishnan's largesse. Similarly, East-West Travel & Trade Links Ltd, a subsidiary of the East West Airlines, was sanctioned an overdraft of Rs 3.75 crore at the CMD's behest in September 1989.
The RBI's audit in 1992 showed that the overdraft was advanced on the basis of book-debts and no effort was made to check the genuineness of the debts.
No attempts were made to inquire into the company's long-term resources and repaying capacity. In March 1995, on the basis of Gopalakrishnan's oral instructions, letter-of-credit facilities and advance sanctions amounting to Rs 55 crore were advanced to the air-taxi division of East-West.
The liability of the company - in both its tours-and-travels and air-taxi divisions - which comes to Rs 63.31 crore, has not been liquidated so far. Here too, the CBI is investigating whether Moopanar made recommendations to the CMD to advance loans of such a magnitude to the airline.
The CBI is also investigating the charge that T.R. Balu, Union minister for petroleum & natural gas, was sanctioned an advance of Rs 25 lakh during the tenure of the present chairman, S. Rajagopalan, in July 1996. This was made in favour of his company 'King Chemicals'.
It has been alleged that under Gopalakrishnan's tenure, King Chemicals' account with the bank had been declared a bad account and the board had taken a unanimous view not to issue any loans. Balu, when contacted, dismissed the charge as baseless.
"Many bankers have taken calculated risks in the past and deviations are common. But in the Indian Bank's case the deviations are so blatant, they could not have taken place without some kind of protection from the ministry," says a CBI official. For the litany of charges showing the former CMD's favours to politicians is endless. Among the various other charges that the CBI is presently verifying against Gopalakrishnan are:
Former panchayat chairman and TMC member O.R. Ramaswami received an advance of Rs 2 crore in 1989 for his company O.R. Chemicals at Paramakudi, Tamil Nadu. The industry has been declared sick and subsequently closed and the loan has been declared a non-performing asset (NPA).
"Many bankers have taken calculated risks in the past and deviations are common. But in the Indian Bank's case the deviations are so blatant, they could not have taken place without some kind of protection from the ministry," says a CBI official. For the litany of charges showing the former CMD's favours to politicians is endless. Among the various other charges that the CBI is presently verifying against Gopalakrishnan are:
Former panchayat chairman and TMC member O.R. Ramaswami received an advance of Rs 2 crore in 1989 for his company O.R. Chemicals at Paramakudi, Tamil Nadu. The industry has been declared sick and subsequently closed and the loan has been declared a non-performing asset (NPA).
After that the agency will have to counter the pulls from the Government of which the TMC is a key component. Whether the CBI can buck these pressures and nail the guilty is the big question.A.R. Marimuthu, a senior TMC leader, obtained Rs 1.5 crore for his factory ARM-Cardboard & Paper Industries Pvt Ltd near Chinglepattu in 1989. The loan was given without any project appraisal and has not yet been repaid.
N.S.V. Sidhan, a TMC MP from Dindigul, received Rs 4 crore for his cycle-tyre industry at Thirumangalam in 1990. The industry has closed down and the loan has yet to be recovered.
But to establish criminality in the transactions, evidence other than commercial loss is required. Once the relevant documents are accessed through the Finance Ministry, the CBI should be able to come up with clinching evidence to prove Gopalakrishnan's nexus with politicians and the alleged quid pro quo.
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