THE Rs 1,336-crore Indian Bank scam could have serious political repercussions. Not only does the Supreme Court-monitored CBI probe threaten to become a millstone for the DMK-TMC alliance in Tamil Nadu, it could also shake the United Front coalition at the Centre. Details of the ongoing investigation available with
Outlook indicate that the scam has already touched two Union cabinet ministers belonging to the TMC.
The modus operandi used is common enough. The wife or dependent of a politician launches a business enterprise; loans and subsidies are managed; so even if the venture runs into trouble, the owner has nothing to lose. Take the case of Dhanushkodi Adithan, the Union minister of state for sports and youth affairs. On November 7, 1989, according to a CBI PE report, Adithan, his wife and two other individuals—Dhaya Devadas and G. Jebakani—launched a private limited firm called Indian Garnet Sand Company. As stated in its memorandum of understanding (MOU), the company aimed "to acquire mining rights of lands in India or elsewhere believed to contain metallic or mineral substances, china clay or other rare earths useful for exporting or developing".
The Adithans identified a rare sand found on Tuticorin and Kanyakumari beaches as ideal material for export and consignments were packed off to countries in the Far East. Everything seemed hunky-dory till Indian Bank—on a request for export expansion—sanctioned the company a loan of Rs 1.5 crore in 1994. This, according to a preliminary inquiry conducted by the CBI, was done without even a cursory study of the company's export proceeds or an assessment of its repaying capacity. Moreover, the CBI found that, in a gross violation of banking norms, Indian Bank didn't send details of export proceeds credited to the RBI.
The loan appears to have been sanctioned purely at the behest of the CMD, without as much as an approval by the board.
Details now made available to the CBI by the Mining Department at Tirunelveli, Tamil Nadu, and the offshore investigation wing of the Atomic Minerals Division, Poojapura, Thiruvananthapuram, show that in 1996 alone Adithan's company over-invoiced its exports as 15,000 tonnes of rare earths while the actual export was less than 3,000 tonnes. While the CBI is yet to register a case against Adithan and bank officials, Indian Bank's new chairman, S. Rajagopal, is working out a formula to recover the outstanding amount from the company.
Then there is the case of Union Minister for Petroleum T.R. Balu's company, King Chemicals. In 1990, again according to a CBI PE report, Balu launched the company to manufacture amino-acids and obtained a loan from Indian Bank. Last year, the RBI's report on Indian Bank's top 20 defaulters as on March 31, '96, said the company failed to pay back Rs 20.12 crore. The reason: "Project cost escalated because project was delayed due to the withdrawal of support by the Tamil Nadu Industrial Development Corporation; and the company suffered a large over-run on account of overhead expenses."
However, despite the fact that there was no production, the CBI's initial investigations reveal that Indian Bank during Gopalakrishnan's tenure continued to sanction loans to the company for five years. In fact, information with the CBI—as detailed in the RBI report —shows that the bank kept pumping money into Balu's company even though a basic ingredient required for the manufacture of chemicals—industrial alcohol—was not obtained by the company. Clearly, factors like project viability and assessment of stock did not guide Gopalakrishnan in distributing the bank's largesse to the TMC leader.
The CBI may have started probing these links, largely due to the Supreme Court's intervention, its hands are tied. Functioning as it does under the Department of Personnel—headed by TMC leader S.R. Balasubramaniam—will it be allowed to probe the murky affair without interference?