Cosmos Bank - Loot & Scoot

Rs. 108.65 crore to Brainer Impex Limited through Vile Parle East Branch, Mumbai and Rs.21.50 crore to MBPY Exim Private Limited through Gokhale Nagar Branch, Pune turning into NPA as quick mortality and infant mortality respectively.

The above two cases are unique in many ways. Both the companies have the same registered office address at 216-217 Orbit Industrial Estate, Mind Space, Behind Inorbit Mall, Near Tangent Furniture, Malad – West, Mumbai – 400064 and subsequently w.e.f. 01/12/2014 at 102 Shree Gajanan Apartment, Chincholi Bundar Road, Opp. Infant Jesus School, Malad – West, Mumbai – 400064 and also have a common email id: malaybiswas@bftlindia.com. The owner or the main stake holder in both these companies is Shri Malaychandra Madhavchandra Biswas.

BRAINER IMPEX LIMITED

This company was incorporated on 23/03/2010 under the name Brainer Financial Technologies Limited. The name of the Company was changed to the present name on 19/03/2012. This company was sanctioned a composite loan of Rs.50.00 crore on 21/03/2012 divided into Rs.45 crore of cash credit and Rs. 5 crore of L/C. The company was also sanctioned additional Rs.22 crore as fully interchangeable with PCFC/FBD. This company was again sanctioned Rs.16 crore as one time L/C on 20/02/2013. Another loan of Rs. 20.65 crore was sanctioned on 27/05/2013. The total loans given are Rs.108.65 crore.

The account became NPA in 2013-2014.

During the year 2012-13 the Company showed the turnover of Rs.248 crore. However, once the loan was disbursed, the turnover slumped to Rs.112 crore. Rest is history and worth investigation by the authorities. During the year 2013-14, this Company had given short term loan to others amounting to Rs.91.41 crore? Is this a case of diversion of funds? This question assumes importance as the advances given by this Company as on 31/03/2013 were Rs. NIL! Only a thorough investigation by the authorities would reveal this. This Company has also taken a loan of Rs.9.75 crore from Bank of Maharashtra, Dapodi Branch, Pune and Rs.8.50 crore from bank of Baroda, Mandvi Branch, Mumbai.

MBPY EXIM PRIVATE LIMITED

This company was incorporated on 03/06/2013 with an authorized share capital of Rs. 5 lac and paid up share capital of Rs.1 lac. The Company was immediately sanctioned clean cash credit of Rs.21.50 crore on 10/01/2014. The primary security was book debts, future contracts and such other sundry items having no material value. In reality, the entire advance/loan of Rs.21.50 crore disbursed to this company was without any security. It was a clean advance to a Company whose promoter director was already a defaulter to the tune of Rs.109 crore.

The account became NPA immediately thereafter in 2014-15.

My preliminary study of MBPY EXIM has revealed some scandalous aspects. The first year (2013-2014) turnover of this new born baby was Rs.33,29,65,276/-. The entire sales figure was locked in book debts as on 31/03/2014. The purchases during this period were Rs.33,02,39,242/-. The entire amount was outstanding as sundry creditors as on 31/03/2014. This is obvious that the turnover shown by the infant baby was only a ‘sham turnover’ and not the real turnover. The loan of Rs.21.50 crore disbursed by the bank to this borrower was diverted by the Company to some other company as the “Short term loans and advances to other” shows the balance of Rs.22,19,35,000/-. The borrowing from Cosmos Bank as on 31/03/2014 was Rs.20,24,55,713/-. The same increased to Rs.20,71,56,177/- as on 31/03/2015. Considering the fact that the debtors are sham and only on paper, the entire loan in unsecured. The debtors were reduced to Rs.24,70,66,331/- as on 31/03/2015. However, the ‘short term loans and advances to others’ increased to Rs.33,50,40,000/-. The sundry creditors remained more or less at the same level on 31/03/2015 as they were on 31/03/2014. Obviously, the recoveries, if any, from the debtors were diverted to others rather than paying the Cosmos Bank’s loan.  The account became NPA during 2014-15.

Considering the common address and the common email id, the question arises – Are these two companies interlinked? The answer is not only an emphatic “YES” but preliminary look into their operations throws up murky dealings.

Directorship of these two companies:

It is interesting to note the movement of Directors in these two companies.

Brainer Impex Limited: The appointment and resignation of Directors of this company is as follows:

Sr. No.	Name of Director	DIN	Date of Appointment	Date of Resignation
1	Malaychandra Madhavchandra Biswas	01290202	Incorporation	04/03/2015
2	Pankaj Radhakrishna Yadav	00056781	Incorporation	04/03/2015
3	Santosh Anilkumar Shah	01259840	Incorporation	04/03/2015
4	Shashank Raghunath Gokhale	01034719	Incorporation	04/12/2014
5	Shambhunath Biswas, Jharkhand	06798137	01/12/2014	07/04/2015
6	Vijay Tiwari, UP	06851950	01/12/2014	07/04/2015
7	Sunil Sachan, UP	07102256	25/02/2015	Continuing
8	Dilip Kumar Gantait, West Bengal	07132865	30/03/2015	Continuing
9	Sourav Gantait, West Bengal	07132871	30/03/2015	Continuing

It is interesting to note the sequential DINs of the last three continuing directors. This clearly shows three persons at serial number 5, 6 and 7 were prepared for being appointed as the Directors of the Company to facilitate the resignation of the main defaulters at serial numbers 1, 2 and 3.

MBPY Exim Private Limited: The appointment and resignation of Directors of this company is as follows:

Sr. No.	Name of Director	DIN	Date of Appointment	Date of Resignation
1	Malaychandra Madhavchandra Biswas	01290202	03/06/2013 (Incorporation)	02/08/2014
2	Pankaj Radhakrishna Yadav	00056781	03/06/2013 (incorporation)	02/08/2014
3	Ghanshyam Ramkumar Chourasia	06574777	03/06/2013	02/08/2014
4	Shambhunath Biswas, Jharkhand	06798137	22/07/2014	Continuing
5	Vijay Tiwari, UP	06851950	22/07/2014	Continuing

Thus after turning both these accounts into NPA, the main stakeholder Malaychandra Madhavchandra Biswas did a vanishing trick which even the likes of Vijay Mallya, Nirav Modi and Mehul Choksi did not do!!

Shareholding pattern of these two companies is also important:

Brainer Impex Private Limited:

Paid up share capital: Rs.4,79,44,500/-.

Malaychandra Madhavchandra Biswas: Rs.3,98,63,300/- = 83.14%

Pankaj Radhakrishna Yadav: Rs.79,18,700/- = 16.52%
Shashank Raghunath Gokhale: Rs.3,12,500/- = 0.07%
Others: Rs.1,31,250/- = 0.27%

EBPY Exim Private Limited:

Paid up share capital: Rs.1,00,000/-

Shambhunath Biswas: Rs.50,000/- = 50%

Vijay Tiwari: Rs.50,000/- = 50%.

A cursory look at the movement of directors from one company to other company would throw light on the fraud played on the bank. The company owned by Malaychandra Biswas and Pankaj Yadav in the name of Brainer Impex Limited becomes NPA quite fast. In order to bail this company out, the promoters of this company incorporate another company in the name of MBPY Exim Private Limited, with a paltry paid up capital of Rs.1 lac. They take a clean loan of Rs.21.50 crore from the bank and become NPA on day one or rather the next moment. They resign immediately after disbursement from the Directorship of the said new company that has become NPA like a “still born baby” – a one step forward from “quick mortality” and vanish into thin air. I am wondering whether the bank has debited the loan of Rs.21.50 crore directly to NPA and wrote off in the account on disbursement!! These two promoters have also resigned from the main company Brainer Impex Limited subsequently on 04/03/2015.

Another point of intrigue is even though both the companies are located at the same address at Malad in Mumbai, the loans have been disbursed from different branches. Borivali branch is near to Malad. However, the loan is sanctioned and disbursed through Vile Parle east branch in the case of Brainer Impex Private Limited. In case of MBPY Exim Private Limited, the loan is sanctioned and disbursed through Gokhale Nagar Branch in Pune. This maneuvering is prima facie fraudulent. It is nothing but ‘branch shopping’ within the Bank prima facie allowed by the Directors themselves.

What are the factors that forced the borrower having operations – whether real or bogus – at Malad in Mumbai to submit its proposal to Gokhale Nagar Branch in Pune and then become NPA immediately? It is surprising that not one Director of the Cosmos Bank while sanctioning a clean loan of Rs.21.50 crore to this newly born borrower aged only a few days even raised any question! Even the cursory background check of the promoters of EBPY Exim would have revealed that they are already the defaulters of the bank and under these circumstances they could not and should not have been sanctioned and disbursed any advance – much less than a clean advance of Rs.21.50 crore. Hence, the borrower was perhaps advised to submit his proposal to Gokhale Nagar Branch in Pune so that RBI inspectors and perhaps the Auditors would not notice the existing NPA status of the main promoter. Directors’ connivance is thus glaringly visible.

The borrower company MBPY Exim Private Limited has its office at Malad in Mumbai, the shareholders and the directors are from Jharkhand and UP, the Company takes the loan from Gokhale Nagar Branch in Pune and the auditor is from Kolhapur. I wonder if anyone has seen such a globalization of a ‘still born baby’ Company! 

The loans of such magnitude could not have been sanctioned without the permission of the Board of Directors. The Board of Directors cannot plead ignorance of such manipulation and maneuvering. The competence and the integrity of the high ranking officials including the Directors of the Bank are at stake. No one can dispute that the cases of ‘quick mortality’ and/or ‘still born baby’ need to be investigated thoroughly to fix the responsibility – both civil and criminal – on the delinquent directors and other employees.

About Rs.130 crore odd are locked as NPA in these two accounts where deviation from prudent banking practices and absolute lack of due diligence is prima facie visible, giving rise to criminality on both sides. I am concerned how many skeletons are going to tumble out of the closets of the Cosmos Bank. Factors such as disbursement of huge amounts by violation of prudent banking norms/practices and without taking adequate collateral security, gross negligence and total absence of due diligence, quick mortality and infant mortality do point towards serious acts of omission and commission bordering on fraud and criminal conspiracy. This is a classic case of a bank creating a fresh NPA to service the old NPA and in the process losing everything. This is also in blatant violation of RBI directives that when the borrower has become NPA, he or his companies cannot be given any fresh loan/advance or any credit facility. Under the circumstances, if one were to brand these two accounts as a great financial fraud committed with the connivance of the Board of Directors, would he be far from the truth? In my sincere opinion, this is a fit case for a police investigation.

There is perfect parallel between Cosmos Bank’s loan to these two companies owned by Malaychandra Madhavchandra Biswas and IDBI’s loan to King Fisher owned by Vijay Mallya. CBI has arrested 8 persons including Yogesh Agarwal, former IDBI Bank Chairman, OV Bundellu, former Dy. MD of IDBI Bank, SKV Srinivasan, former ED of IDBI Bank and RS Sridhar, former GM of IDBI Bank along with former CFO of now defunct King Fisher Airlines A Raghunathan, former AVP Shailesh Porkar, former DGM – Finance Amit Nadkarni and former Sr. Manager Account A C Shah. They were arrested for sanctioning loans in blatant violation of RBI norms, industrial practices and money laundering. One may wonder that if Vijay Mallya had consulted Malaychandra Madhavchandra Biswas a.k.a. Chota Mallya, he would not have to flee to UK; and if former Board members and GMs of IDBI Bank had consulted the present dispensation at Cosmos Bank lead by Chairman Emeritus Mukund Abhyankar, they would not have found themselves behind bar!!

As a shareholder and account holder of the bank, I had approached Mr. Vikrant Ponkshe, the then MD of the bank for necessary explanations and clarifications on this open Loot and Scoot. He sheepishly refused to furnish any. But he boasted of recovering substantial amount of Rs.60 lakh against Rs.130 crore!!! This is really sickening.  However, during one my visits to Cosmos Towers, he revealed that the Defaulter Malaychandra Madhavchandra Biswas is reportedly related to Mr. Pranab Mukherjee and hence I should leave this NPA account alone. I was quite surprised at this explanation. Mr. Vikrant Ponkshe, the MD whose expertise lies with Risk Analysis, would be doing some different type of risk analysis!

After Mr Ponkshe resigned on 31/12/2016, I approached Mr. Milind Kale – Chairman and Dr. Mukund Abhyankar – Chairman Emeritus for explanations. Dr. Mukund Abhyankar was quite non-challant in his response and again boasted of the defaulter’s relation with the politician who was then occupying the highest position in the country. Mukund Abhyankar even challenged me to do whatever I wish to do as no system would touch them considering the political clout the defaulter is enjoying within the system.

Whether the ex-President knows about this or not is not the issue. But the fact that his name is being touted by the delinquent directors of Cosmos Bank is sufficient enough evidence of the direct involvement of the entire Board in this fraud. On further enquiry within the staff members of the bank, I came to know that this defaulter is very close to two Mumbai based  Directors.

This type of fraud is not possible without the active connivance of the entire Board. Mr. Vijay Balwant Vaidya, the present GM – Recovery, was the then AGM when Rs.108.65 crore were defaulted at Vile Parle east branch. Will he now file FIR against himself at Vile Parle police station? Will he file FIR against the then Branch Head at Gokhale Nagar Branch? Will he file FIR against the Board of Directors as well as the MD and Jt. MD for the loss of Rs.130 crore that is directly because of blatant violations of lending norms laid down by RBI?

This is a fit case for the Government to dismiss the Cosmos Bank Board immediately and order investigation by registering FIR against the Board as well as the Defaulters. This fraud needs immediate intervention by the RBI, CBI, EOW, Central Registrar of Co-operative Societies, Finance Ministry and other relevant authorities. But Dr. Mukund Abhyankar is confident, no one would touch him.

The bank loot continues.