PANDORA’S BOX

Source: The Hitavada      Date: 24 Mar 2018 10:20:02

THE colossal fraud played on Punjab National Bank (PNB) by diamond businessmen Nirav Modi, Mehul Choksi and Rotomatc’s Kothari, and in effect on larger Indian public, seems to have opened Pandora’s Box. Because since then not a day has passed without the coming to light of some high profile financial fraud or the other, either in the banking sector or in the corridors of all powerful Government administration. Unfortunately, this opening of can of worms creates the impression that every nook and corner of the country’s administration has sunk deep into the quagmire of fraud, corruption, mischief, manipulation, rent seeking and cronyism. The frequency with which the media is reporting such high profile frauds involving huge amounts of public money is very disheartening and disconcerting, to say the least.

The nation’s premier investigating agency, the Central Bureau of Investigation (CBI), seems to have its hands full, going after the crooks hiding in every nook and corner of the country. The latest fraud on a bank has cropped up in Hyderabad in which the CBI has booked the promoters of an infrastructure and construction firm for allegedly duping a consortium of banks to the tune of Rs. 1,394 crore. On a complaint filed by the Union Bank of India on behalf of eight banks, the CBI has filed an FIR against the directors of the Totem Infrastructure Ltd. For the banks and the Income Tax Department, with tax dues of a whopping Rs. 400 crore, not surprisingly, the promoters are untraceable. Friday’s newspapers also report another fraud amounting to a mind-boggling sum of over Rs. 6,000 crore in Haryana by a company named Indian Technomac. The company since has been wound up and its main accused and MD, Rakesh Kumar Sharma, is nowhere to be seen. The company has been accused of evading taxes, non-payment of employees’ salaries and EPF, power bills and a host of other outstanding dues.

There is a well woven pattern in these frauds which have an uncanny similarity everywhere. Be in the good books of top echelons of financial institutions, have close connections in the corridors of political power, usurp as much money from these institutions without offering any significant collateral to match the loan amount, as did happen with the Choksi loan, siphon off the money to safe havens through the money-laundering route and vanish from the country without the victim financial institutions getting the chance to catch them. In all the cases mentioned above, the fraudsters have vanished from the country.

Nirav Modi, Vijay Mallya, Mehul Choksi, Kothari, promoters of the Hyderabad firm, those from the Haryana company, all have absconded from the country before the long arm of the law could reach them. As has been shown in most of these cases, it becomes a Herculean task to get them back to the country to try them for the frauds they have committed. They are all making merry abroad wherever they have made their new residence without the fear of being caught by the Indian authorities as they know the extradition proceedings is a long drawn process which will take years to conclude.

If frauds continue to take place at this rate everywhere in the country, because that seems to be the pattern all over, the whole financial system will face the danger of collapsing. The PNB’s loss of Rs. 14,506 crore in FY 18 so far is an eloquent example of this corrosion of financial institutions caused by fraud. The Finance Ministry has informed that since 2011, PNB has issued an astronomical number of 41,000 LoUs (Letters of Understanding), of which Nirav Modi and Mehul Choksi were given as many as 1,590. This raises a serious question mark over the way the commercial banks function in the country.