Murky financial deals

Print edition : May 08, 1999

India's National Magazine from the publishers of THE HINDU

Mounting evidence of involvement in irregular financial deals forces the resignation of a Maharashtra Minister. He is the third person to leave the Ministry under similar circumstances.

ON April 26, the latest in a long string of financial scandals involving senior leaders of the Shiv Sena-Bharatiya Janata Party Government in Maharash-tra, resulted in the resignation of Social Welfare Minister Babanrao Gholap. Gholap, a senior Shiv Sena figure has been charged with having been involved in siphoning off through a dubious cooperative bank funds meant for the welfare of the poor.

It is perhaps misleading to describe Gholap's dealings with the Awami Mercantile Co-operative Bank as a scam, since they more closely resemble worse things. Three corporations controlled by Gholap's Ministry simply handed over Rs.4.5 crores to the Awami Bank, violating a Government Resolution of October 1996 prohibiting such investments in institutions other than nationalised banks or private banks with a net worth of over Rs.100 crores. Even more amazing, the Awami Bank was facing liquidation proceedings since July 1995.

On February 18, 1998, the Annabhau Sathe Scheduled Caste Development Corporation deposited more than Rs.2 crores with the bank for a 30-day period. However, the bank's receipt stated that the deposit was for 270 days. The Annabhau Sathe Corporation wrote to the Awami Bank five days later making it clear that the deposit was only for 30 days, and that the amount should be returned with interest at the end of term. In the event, the Corporation was able to recover only Rs.50 lakhs by June, that too after a first cheque issued by the bank drawn on the Development Credit Bank bounced.

Similarly, Rs.2 crores deposited by the Vasantrao Naik VGNT Corporation with the bank for a 46-day period on March 21, 1998, disappeared. The Corporation sent two letters to the bank, in June and August, first asking for a refund of Rs.1 crore, and then for the entire amount deposited. The Awami Bank did not return the money. In fact, its Administrator maintained that the bank had not received the money in the first place. The Mahatma Phule Development Corporation's deposits too went the same way. It deposited Rs.1 crore on May 21, 1998, even as its sister corporations were discovering that the Awami Bank had no means to meet its obligations. Again, the bank Administrator denied having received any deposits.

Babanrao Gholap.-VIVEK BENDRE

A report filed in September 1998 by Mumbai Collector and District Magistrate Sanjay Chahande along with the Mumbai Police Criminal Investigation Department's (CID) First Information Report (FIR), brought to light the irregularities. The Awami Bank's chief executive officer K.A.F. Amin and Co-Administrator Subodh Kadam had opened accounts on behalf of their organisation with the Sangli Bank's Juhu branch, the Global Trust Bank's Bandra branch and the Bank of Punjab. Using letterheads and bank documents freely, Amin, Kadam and their accomplices allegedly helped themselves to the money. Of the Rs.4 crores held in the Sangli Bank account, Rs.3.40 crores went to a Mumbai businessman allegedly close to the Shiv Sena.

Investigation in the matter became inevitable when bureaucrat Uttam Khobragade, appalled by what he heard at a board meeting of the Vasantrao Naik Corporation, wrote to Chief Secretary P. Subrahmanyam about the affair. Reports appeared in the local press. An FIR naming eight persons was filed and arrests followed. Gholap's personal assistant, Anil Pagare, was arrested although the Minister himself remained untouched. Investigators drew the obvious conclusions about Gholap's role in the affair. The CID had in its possession documents and statements that showed Gholap's involvement in the matter.

Perhaps the most important of these was a letter allegedly written by Pagare to the managing director of the Mahatma Phule Corporation on August 6, 1998. The letter asked for a further Rs.3 crores to be deposited with the Awami Bank, although the bank had not returned Rs.1 crore the Corporation had already put up. The letter also mentioned that the Rs.1 crore deposit made for a 46-day period be retained for 180 days. "As these are the instructions of (the) Minister Social Welfare," Pagare wrote, "please do the needful immediately." On the same day, the Mahatma Phule Corporation's chairman put up a note which spoke of Gholap's involvement. "As per telephone call received from (the) Hon'ble Minister, Social Welfare, term for Rs.1 crore is to be increased for (a) further period of 180 days, and the additional amount of Rs.3 crores will be deposited."

More direct evidence was also available. In early April, the Economic Offences Wing (EOW) of the Mumbai Police filed a report charging Gholap and his wife Sashikala with having received Rs.21 lakhs in the Awami Bank deal. The EOW report was filed before the Girgaum Additional Chief Metropolitan Magistrate, who had ordered the investigation on the basis of a complaint by Janata Dal activist Sanjeev Chimbulkar. Gholap's aide, Shivaji Morade, received a further Rs.19 lakhs, the report states. The funds were allegedly paid through finance broker V.B. Mehta, one of the accused in the bank fraud. Mehta, the report charges, had worked out the details of the bank deposits with Pagare and received a commission of Rs.57 lakhs. Of this, he allegedly passed on Rs.40 lakhs to the Gholaps and their associates.

None of these developments led Chief Minister Narayan Rane or his party boss, Bal Thackeray, to take action against the Minister. A succession of vague proclamations emanated from the Shiv Sena hierarchy, variously claiming that Gholap could not be asked to resign in the absence of court strictures against him, or that the evidence of wrong-doing was inadequate. Dark hints were on occasion thrown of action against the Minister, only to be subsequently forgotten. Nor did the Mumbai Police move to arrest the Minister, despite the mass of evidence it had collected. Gholap, for his part, insisted that the allegations were part of "baseless propaganda" put out by his political enemies.

Matters might have dragged on were it not for a public interest petition filed by social worker Milind Yawatkar, complaining about the police's failure to arrest or even interrogate Gholap, and pleading that the investigation be carried out under the direct supervision of the Bombay High Court. Yawatkar's petition came up for hearing before the bench of Chief Justice Y.K. Sabharwal and Justice S. Radhakrishnan on April 26. Fear that the High Court could order Gholap's arrest, a move that would have caused enormous political damage, seems to have forced Rane's hand. Late that evening, the Chief Minister summoned Gholap and asked him to hand over his resignation. Rane later claimed that the Government had authorised the police to issue arrest warrants, but Deputy Chief Minister Gopinath Munde said that Gholap had only been asked to give an explanantion. The High Court has called for a status report on the case.

GHOLAP'S woes in the bank case are unlikely to be his last ones. Yawatkar has filed a separate petition in the High Court, which has led to an Anti-Corruption Bureau (ACB) investigation into Gholap's financial affairs. The ACB report, which could also lead to Income Tax Department proceedings against the former Minister, is scheduled to be presented to the court in October. The ACB, sources told Frontline, has found not a little evidence of financial wrong doing by Gholap, a colourful figure who was twice convicted, in 1983 and 1972, under the Gambling Act. He was fined Rs.35 and Rs.25 on charges of engaging in low-level matka gambling.

Among the more interesting documents the ACB has discovered are the records of an account that Sashikala Gholap, who has no independent means of income, opened at the Janalaxmi Co-operative Bank in Nashik. Started in March 1996 with an initial deposit of Rs.500, the account saw massive cash deposits: Rs.10 lakhs on April 8, 1996 on the eve of the Lok Sabha elections; and five deposits of Rs.21.50 lakhs between July and August 1996 alone. By August 1998, Sashikala Gholap's account recorded credits of Rs.57,88,467 and debits of Rs.35,01,250. Gholap became a Minister in March 1995.

Shashikala Gholap's bank statement shows huge transactions within a short span of time.-

Other financial dealings by Sashikala Gholap and her husband are no less perplexing. Documents made available to Frontline show that between May and June 1996, she bought four plots of land in Nashik adding up to an area of 34.875 acres for a mere Rs.5,85,900. Even if this price is accepted as correct, it is unclear how the Gholap family could afford this amount. Yawatkar's petition charges that Gholap had in the past been unable to repay a loan of Rs.500 taken from the Sanjay Gandhi Niradhar Yojana Scheme, a project to aid the indigent. Gholap had obtained a loan to purchase a jeep from the Nashik Road Deolali Vyapari Sahakari Bank in 1991, presumably for use in his political work. According to the petition, after struggling with the instalments for five years, he paid back the entire outstanding balance of Rs.2,70,443 in cash four months after becoming a Minister.

How these funds materialised could be explained through investigation of Gholap's numerous creative enterprises while in office. In October last year, The Asian Age reported how loans were made by the Mahatma Phule Corporation to set up nine powerloom enterprises in Nashik, the 108 joint owners of which later turned out to be fraudulent. The loans had been made on Gholap's written instructions by the Corporation's former Managing Director, H.V. Sonawane. The recipients of the funds had given false addresses, had not registered their nine joint ventures, and did not possess land on which they might have set up powerlooms.

This year, three senior Shiv Sena-BJP alliance leaders have been indicted for corruption. Former Chief Minister Manohar Joshi was held responsible by the Bombay High Court for engineering violations of land laws to benefit his son-in-law. Joshi promised to resign from the Maharashtra Assembly following the court's orders, but backtracked. Minister of State Ravindra Mane, found by the court to have approved illegal instructions from Joshi, resigned. Gholap was the third. If allegations that Deputy Chief Minister Gopinath Munde had a role in controversial contracts awarded by the Maharashtra State Electricity Board are proved, a fourth resignation could soon follow.

In a sense, the ironies of the Gholap affair transcend their immediate import. Last year, the former Minister won a defamation action against social activist Anna Hazare, who had charged him with corruption. Hazare's counsel in that case, Mumbai lawyer P. Janardhanan, now represents Yawatkar in the High Court, and seems set to vindicate his former client. The course of events in the High Court will now decide Gholap's future.

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