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| ‘Mumbai based director received kickbacks in building deal’ | | `Holed banks' of JK Bank attract RBI attention | | Early Times Report
Srinagar, Sept 1: Unfair corporate governance practices have surfaced in Jammu & Kashmir Bank, leaving the bank's stakeholders, shareholders and the general public fuming. The Board of Directors have been found behind controversial, large scale financing and property deals outside the state of Jammu & Kashmir.
The weak corporate governance and supervisory controls of the bank got exposed when the money laundering activities in the bank were exposed in a sting operation by the Cobrapost. Immediately after the expose, the Reserve Bank of India slapped a fine of Rs2.50 cr on the bank. This is the highest penalty imposed on the Bank since its inception and that too when the bank is celebrating its platinum jubilee.
Highly placed sources in the Reserve Bank of India revealed that violations of the codes of conduct by the Board of Directors of the bank are being looked into. "If found correct, the RBI will not hesitate to take action against the bank," said the source.
The bank's Board is in the hands of monopolistic guards and others with political patronage. Their appointment on Board through the 1970's, 80's, 90's and now in the 21st century as well is shocking. This is one of the most disturbing instances of misuse of political proximities of influential families in this State. Not far away, as discussed on the floor of the State Assembly, one of the Bank`s independent director was alleged to be a master mind of purchase deal of Mumbai BKC property alleged to be priced very heavily and violating various civic codes.
Even there are allegations that few directors have derived financial benefits through their proxy companies as well as also drawing hefty sums through so called taxation consultancy etc. it is also alleged that few directors on the board of the bank are directly interfering in the day to day operations in various departments. This all violates codes of conduct as binding on Board members.
Documentary evidences reveal that a Mumbai based director of the Bank, Nihal Chandrakant Garware, has been instrumental in siphoning of crores of rupees from the bank through a controversial property deal. This has earned him a name as a corporate broker of Mumbai. Pertinently, Nihal Garware projects himself as a close confident of the Chief Minister Omar Abdullah.
According to inside reports, the bank has shifted to its new zonal office building in Mumbai at Bandra Kurla Complex and the Chief Minister Omar Abduallh is going to inaugurate it in the first week of September. It is this building which stands glaring example of swindling bank's money through purchase of this asset, later on continuing with purchase of furniture and fixture items and huge interior and electric works at exorbitant rates. Sources from Mumbai have shockingly revealed today that 23 television sets have been fixed at various places including three TV sets in the chairman's room. It's reliably also known that two LED sets of Samsung company of Rs.5 lakhs each have been fixed in a single room which the staff of the bank calls as a board of directors room.
Here's the sequence of events that lead to purchase of this dark horse of the bank now to act as zonal office building, the sizeable portion of which is unathourised construction. Smartly the negotiator on the bank side and the counter party that is M/S Akurti have used the term 'other usable area' for the unauthorised portion of this building and used it for making hefty payment of over Rs 20 crores besides making payment of over Rs. 60 crores as part of mutually over priced deal.
In a board meeting dated 25-2-2010, Nihal Garware as member estates committee strongly put across plan in the board for purchase of the entire structure of Akruti Gold BKC Mumbai. At that moment he intimates the board "total chargeable area 42000sft offered at Rs26,000 per square feet and total cost of Rs.109 crore for entire building and Rs.73 crore for six floors. The Board accorded permission for negotiations. Even Rs.109 crore projected by Nihal Gaware as cost of the building was an offer price subject to routine hard bargaining.
The board gives permission to purchase six floors in its meeting dated 15-4-2010. The board also desired to explore possibility to purchase entire building. The utilisation of the space was not mentioned neither justified before the board. Senior officers of the bank at that time expressed shock about the future utility of that huge space, given the fact that the staff strength of Mumbai zonal office was less than 20. The board, ignoring all these pre-requisites still directed to make immediate payment of token money.
Within 11 days the bank makes payment of Rs.25 crore through payment order dated 26-4-2010 from its Andheri branch under No. 082696 as holding money. Another letter of intent dated 26-4-2010 with amount of Rs 25 crore was also released. Here the question is why two letters of intent were signed.
In contravention to its own board resolution, the bank made payment of Rs.171,96,90,000 with chargeable area manipulated to 65065 sft at Rs.26000 per sft as against the board approved space of 42000 sft which qualified to a total amount of Rs109 crore. This has thus amounted to deliberate, intentional huge financial loss to the bank.
Pertinently, the board had mandated Nihal Garware and other estate committee members including Mohammad Ibrahim Shahdad to negotiate the rates and get it reduced from Rs.109 crore, but Garware and Shahdad not only opted not to negotiate, instead, as documentary evidence speaks, mutually evolved on a payment of Rs.172 crore. This criminal sequence of events has resulted in huge loss to the bank. Thus, it is loud and clear that this estate committee dominated by Nihal Garware boldly misrepresented, misinformed, using deceptive means and made to believe the chargeable area to be 65000 sft. Allegedly, the exaggerated chargeable area netted a personal benefit of an amount of Rs.60-70 crore of public money.
The bank sources at the helm at that time also revealed that this negotiator was in touch with a lady executive of M/S Akurti. The telephone records of the players in the deal can bear the witness.
Reasonability and sympathy with the bank were ruled out while purchasing this huge structure by a small bank like J&K Bank whose logistical asset holdings are expected to serve further 10 years. The Garware led estates committee piloted the entire project at a swift pace while ignoring the staff strength which does not exceed 15 officers, few peons and rivers with 2500 sft besides housing facility for treasury operations in the bank's owned property sufficiently catering to their needs.
The Bank sources wondered that such a hefty sum should have been used to purchase at least 50 to 70 branch premises across the country, to save huge outflow of monthly rentals.
For what purpose such a huge property deal has been undertaken in such haste? Isn't it a fit case of meeting personal interest against the bank's interest and a fit case for thorough in-depth investigation by the Reserve Bank of India through the auspices of central bureau of investigation?
Even as some conscious officers in the bank raised questions about the deal and the then head of the estates department refusing to release the payment to the seller, Nihal Garware managed to get the payments released after getting the 'irritant' officers transferred.
On July 22, 2011 Municipal authorities of Greater Mumbai shot a notice to the bank to remove unauthorised portion of the building from 1st floor to 10th floor. The bank didn't respond to the notice and subsequently an FIR was lodged against the bank and the seller M/S Akruti. This incident substantiates the fact that the bank didn't bother to exercise due diligence at the time of purchasing the property. It is alleged that J&K Bank was also made to pay half of the taxes, dues and charges which the seller had not paid even before the bank took over the deal and the bank was not under obligation to pay such defaulted state dues of the seller.
Even the bank has been made to pay for the parking slots despite bank making outright purchase of the whole building.
Allegations also galore against this high flying director from Mumbai is a suspect of charging commission of 2 to 5 per cent for piloting and securing sanctions from the board in corporate loans. One such allegation is about a corporate loan transaction of Rs. 100 crores in Bangalore which transaction reported its serious deficiencies in only four months of disbursement and has since been restructured under Corporate Debt Restructuring package (CDR). Those closely monitoring the functioning of the bank want a thorough probe into the corporate loan portfolio of the bank in the past three years and dubious immovable asset creation.
"The mess in the Bank needs to be cleaned quickly. A widespread campaign has been launched by cross section of media and business community that time has come to bring the board of directors and chairman subject to accountability," said a former director of the bank. This can restore the performance of the organization," said a former director of the bank.
Another former director said the existing board of directors needs immediate overhauling. "It is a case of mis-governance. If reports are correct, the directors on board of the bank lack interest in making the institution strong. Allegations have surfaced against them which state that they are engaged in realising their personal interests. Here government has to act. They should immediately replace the existing breed so that the bank's fundamentals are not weakened." |
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