Depositors rue fate as Co-op Dept sleeps
MADHYA PRADESH, they say, is the best place to cheat unaware and economically weak depositors who invest their life savings in credit cooperative societies. The societies just need to convert into cooperatives under MP Swayatt Sahkarita Adhiniyam 1999 and they are free to flout laws or misappropriate depositors? money with no regulatory authority to keep them in check.
MADHYA PRADESH, they say, is the best place to cheat unaware and economically weak depositors who invest their life savings in credit cooperative societies. The societies just need to convert into cooperatives under MP Swayatt Sahkarita Adhiniyam 1999 and they are free to flout laws or misappropriate depositors’ money with no regulatory authority to keep them in check.
The 1999 Act empowers the Registrar, Cooperative Societies, to act as the guardian and the final authority to prevent fund misappropriation and ensure that the cooperatives function as self-reliant, autonomous and democratic business enterprises that are managed by members for their economic and social betterment.
But this spirit lies crushed with State Cooperative Department not taking steps against the defaulting organisations. Rather, it has been party to it.
Gujarat Mercantile Credit Sahkarita Limited, Indore, (GMCSL) is a recent example that has put at stake the future of 20,054 account holders and 30 cooperative institutions, which have invested their money in it. The Cooperative has frozen the encashment of fixed deposits and withdrawals from savings accounts involving a sum of Rs 17.04 crore since January 2005.
Demanding their money back, Gujarat Mercantile Credit Sahkarita Limited Amanatdar Peedit Sangh has charged GMCSL Chairman O T Gandhi and Managing director Janak Gandhi with siphoning of their money worth Rs 138.42 crore including cash credit (Rs 1.52 crore), overdraft (Rs 103.35 crore) and loan (Rs 33.55 crore) to Maha Gujarat Credit Cooperative Limited, Bharti Industries, Gujarat Commercial Cooperative Bank Ltd and Malwa Cooperative and to people close to GMCSL board of directors.
Besides, Peedit Sangh has alleged that depositors’ money was transferred into benami accounts by showing entries into books of accounts. “The dividend accrued on these deposits was pocketed by Gandhi,” depositors said and charged him with causing loss to GMCSL by siphoning off its fund worth Rs 9.90 crore as term deposit and 12 lakh as grant to Gujarat Bank formed in 1999.
Nevertheless, Cooperative Department has maintained silence regardless of complaints made against GMCSL and despite Section 33 of 1999 Act, which states that if a (board of) director is guilty of misappropriation, breach of trust or dishonesty resulting in shortfall of revenue, he will be personally liable to make good that loss for shortfall without prejudice to any criminal action to which the director may be liable under any law.
Leave aside taking action, Department Audit Officer S R Atutiye who has submitted GMCSL verification report to Joint Registrar V P Maran last month ignored audit of Rs 103 crore given as overdraft by the Cooperative, though he has verified FD accounts, disbursement made and action taken against defaulters by the institution.
Moreover, the Cooperative Department and GMCSL have denied information to aggrieved depositors about people to whom overdraft and pre-mature encashment of FDs were made. While Department didn’t bother to respond, GMCSL expressed inability stating that its documents have been seized by various agencies for investigation. In addition, the Cooperative Department didn’t object when Janak Gandhi proposed formation of Maha Gujarat Credit Co-
operative Society Limited in 1997, which became a cooperative in 2002. As per law, Gandhi had no right to make this proposal, as he was already the managing director of a cooperative society called Gujarat Mercantile Credit Cooperative Limited (GMCCL).
GMCCL, formed in 1992, was rechristened as GMCSL in 2000 under 1999 Act. The matter doesn’t end here. Department approved formation of Maha Gujarat into a cooperative when the latter’s annual statement of accounts showed just Rs 16,409 in balance.
“On what basis did the Department accept conversion of Maha Gujarat into cooperative when it showed no dynamism, entrepreneurship or financial transactions? After all there has to be some criteria,” Peedit Sangh coordinator D K Chaturvedi questioned.
Sangh president Udai Jaiswal said that depositors have been denied access to subsequent progress of Maha Gujarat, which smacks of dubious transactions. “Moreover, Maha Gujarat didn’t file annual returns regularly. Neither did the Department nor the chartered accountants object to it. The balance sheets of GMCSL and Maha Gujarat are highly conflicting,” Chaturvedi said.
Interestingly, the Department permitted the formation Maha Gujarat in 1997 without bothering to know name of fathers of all the 50 persons who proposed the constitution of cooperative society. The prescribed format issued by Department has no mention of fathers of proposers.
Finally, the Peedit Sangh has demanded to know whether cooperative institutions registered under 1999 Act are above law to the extent that the State Government has proved to be helpless in providing justice to depositors.