EOW objects to ED’s plea opposing closure of MSC Bank case

MUMBAI: The Economic Offences Wing (EOW) of Mumbai police has objected to the intervention application filed by the Enforcement Directorate (ED), opposing the closure of a case regarding alleged irregularities in the sale of co-operative sugar factories at throwaway prices by the Maharashtra State Co-operative (MSC) Bank to people/ entities close to the bank directors.

In their reply to the ED’s plea filed before a special court, the EOW stated that earlier, the court had held that the ED had no locus to intervene in the matter and therefore the intervention application was not maintainable.

The case arose out a public interest litigation filed by Andheri-based social activist Surinder Arora, 64, who had alleged police inaction in the fraud pertaining to thousands of crores obtained in loans by sugar cooperatives, spinning mills and other processing units from district and cooperative banks.

MSC Bank, the apex bank that controlled credit to the co-operative sector in the state and was handled by politicians in power, landed in trouble in 2011 after an inquiry report by NABARD found the bank was in the red, with a negative net worth of ₹144 crore. The report indicted the bank’s board of directors for financial mismanagement that led to ballooning of non-performing assets. This was largely due to handing out of loans to sugar co-operatives and spinning mills in violation of norms.

The complainant Arora had alleged that illegal loans were sanctioned and secured assets were sold out at throwaway prices, contrary to norms.

The EOW had filed its first closure report in September 2020, which was accepted by the court. In October 2022, the probe agency informed the special court dealing with cases against MPs/MLAs that it was conducting further investigation into the matter based on points raised by the protest petitioners (complainants) and the Enforcement Directorate (ED).

In its second closure report filed in January this year, the EOW stated that the investigation conducted based on the information provided by the ED, the statements recorded, and the documents obtained did not reveal commission of any cognisable offence or any unfair loss caused to the bank.

It was earlier alleged that Baramati Agro Limited, then managed by Rajendra Pawar and his son Rohit Pawar, bought Kannada Cooperative Sugar Factory despite not having the financial capacity to do so. The amount used by the company to purchase the factory was sanctioned by different banks under the working capital facility for different accounts, which were diverted for the purpose.

The closure report denied all the allegations and instead stated that in 2011, the MSCB board of directors was dissolved, and an administrator was appointed in its place, ensuring that all bank affairs thereafter were conducted through the administrative officer appointed by the government.

“The sale of the factory was done during the administration period and in accordance with the SARFAESI (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act. No evidence was found regarding the involvement of directors in the sale of the factory to the relatives of the directors of the bank,” the report stated, adding that Baramati Agro Limited had enough funds to buy the said factory.

Another issue raised during investigation was regarding the selling of Jarandeshwar Sugar Factory to Guru Commodity private limited by the MSCB for ₹65 crore. It was alleged that Guru Commodity immediately rented the factory to Jarandeshwar Sugar Mill Limited at ₹12 lakh per annum, but it was seen M/s Jay Agrotech Private Limited, managed by Ajit Pawar’s wife Sunetra Pawar and uncle Rajendra Gahdge, had given ₹20 crore to the company to purchase the factory.