Politics over a scam

Sharad Pawar turns an E.D. inquiry against him into a political opportunity to play victim, but there is some merit in the investigation into the cooperative bank scam.

Sharad Pawar at a press conference in Mumbai on September 25.

THE Nationalist Congress Party (NCP) chief and three-time Maharashtra Chief Minister Sharad Pawar demonstrated once again why he is considered a seasoned and wily politician.

In September, the Enforcement Directorate (E.D.) booked Pawar, his nephew and former Deputy Chief Minister Ajit Pawar, and others in a criminal case of money laundering linked to an alleged Rs.25,000-crore scam involving the Maharashtra State Cooperative Bank (MSCB). The E.D. has filed an Enforcement Case Information Report (ECIR), which is the equivalent of a first information report (FIR), against Pawar, Ajit Pawar and about 80 others who are connected to the bank.

Pawar was asked to present himself at the E.D. office for questioning. On September 27, when he was to reach the office in Mumbai’s Ballard Estate, Section 144 of the Code of Criminal Procedure (which prohibits the assembly of four or more in an area) was invoked as the authorities feared there would be a law and order problem. NCP workers threatened to gherao the office. Reportedly, E.D. officials asked Pawar not to come to their office and said the case would be postponed indefinitely.

Characteristically, Pawar turned the case on its head and made it seem that he was a victim of the Bharatiya Janata Party’s (BJP) vendetta politics. He alleged that the forthcoming Maharashtra Assembly election had prompted the E.D.’s move.

If the BJP-Shiv Sena combine’s strategy was to expose Pawar a few weeks ahead of the election, it failed completely. The timing, in fact, worked better for Pawar, who used the opportunity to accuse the ruling party of resorting to pettiness in order to sabotage rivals. It was a boost for the NCP, which has witnessed an exodus of politicians and party workers, many of whom have joined the BJP.

The official line from the Maharashtra government was that the E.D. started the inquiry on the basis of an FIR filed by Mumbai Police’s Economic Offences Wing on orders passed by the Bombay High Court in August 2019. The orders followed a public interest litigation (PIL) petition that claimed the MSCB suffered massive losses on account of bad loans given to several cooperative sugar factories.

Pawar told the media he was not involved in the scam and had nothing to hide and that these strong-arm tactics were an indication of the government’s insecurity about his popularity. Pawar said he would have been “surprised” had there not been such an action against him given the huge response he received during his election campaign across Maharashtra. In fact, he said he needed to “thank” the E.D. for this attention as it proved how desperate the ruling government was to ensure victory.

“The timing of this action is questionable. It smacks of poor politics and is undemocratic. All parties should fight the election in a fair manner. Why do they want to start a smear campaign? What are they afraid of? In any case it looks like it backfired,” said R. Nimbalkar, senior NCP leader and chairman of the Maharashtra Legislative Council.

According to a police officer, if there are financial irregularities to the tune of Rs.100 crore or more and there is an FIR filed, the E.D. is compelled to act on it. The timing of the inquiry against Pawar may have coincided with the announcement of the election, but the E.D. acted on the orders of the court.

An NCP party worker said Pawar was being investigated because 25 of the MSCB’s 44 board members were members of the party headed by Pawar.

Details about the condition of the MSCB, however, indicate that the E.D.’s move was not just politically motivated. In 2010-11, the MSCB was in deep debt, a crisis that could have destroyed the savings of thousands of depositors, many of whom were farmers or belonged to the lower-income strata.

Media reports from 2011 say the MSCB case began that year when the bank’s financial audit showed losses amounting to around Rs.1,000 crore owing to non-performing assets. The auditors demoted the bank to “D Grade”, which eventually led the Reserve Bank of India (RBI) to put the bank’s licence renewal on hold.

A Mumbai banker said the MSCB was a typical case of a cooperative bank going under because of mismanagement and corruption. The only difference was that big bosses of the NCP were involved in this bank. Reports say the RBI asked the then Congress-led government to bail out the MSCB by standing guarantee to the losses. The government refused, and this led to the dissolving of the bank’s board, which was controlled by the NCP. Pawar, who was the Union Minister for Agriculture, apparently did little to save the bank.

According to media reports from 2011, the bad loans are suspected to have been given to the bank’s directors. If true, this was a deliberate defrauding and cheating of the bank and its shareholders. The loans were allegedly given without collateral to cooperative sugar factories, spinning mills and related enterprises that were troubled with weak financials and negative net worth. Most of these were owned directly or indirectly by the bank’s directors.

Recently, there has been a spate of cases pertaining to cooperative banks and bad loans. The Central government via the RBI appears to be trying to sort out the mess so that small depositors are not affected. The E.D.’s timing may be politically wrong, but there is some validity in the move to make these banks accountable.

Anupama Katakam