KP had illegally availed of over Rs800 crore from the banks in cahoots with the chairman and his son. Soon after, SEBI passed an order barring KP from the capital market for 14 years.
Sucheta Dalal
In February 2012, the office of the custodian, appointed under the Special Courts Act of 1992, filed a petition seeking custody of all the money paid by Ketan Parekh (KP) to Bank of India and Madhavpura Mercantile Cooperative Bank (MCCB)—the two banks duped by him as his speculative excesses pushed him to bankruptcy.
KP had illegally availed of over Rs800 crore from the banks in cahoots with the chairman and his son. Soon after, SEBI passed an order barring KP from the capital market for 14 years. Yet, the scam-accused managed to stay out of jail by providing an undertaking to a Gujarat court that he would pay back his dues in instalments. It was this hope alone that seems to have kept MCCB, a cooperative bank that holds deposits for other cooperative banks, alive for so
long.
The custodian has correctly raised the same question we have asked for years. What is Ketan Parekh’s source of income for Rs72.2 crore paid to MCCB until 2005 if he is barred from trading? The custodian also wants the court to direct KP to disclose his source of funds in respect of the shares of 19 companies that made payments to MCCB on his behalf.
Interestingly, now that the case has effectively closed the possibility of KP paying any more instalments to MCCB, the RBI has woken up and reportedly threatened to shut down the Bank. A show-cause notice has been issued to the board asking why its licence should not be cancelled. The Bank is currently under an administrator, Radha Singh. It had a negative networth of Rs1,347 crore at the end of March 2011, say media reports, and has recovered only Rs3 crore from defaulters in all these years.
A news report says that the Bank needs to pay around Rs100 crore to individual depositors and Rs617 crore to 67 cooperative banks in the state. A closure of MCCB, we learn, may affect just about three banks.