Two co-op textile societies tried to cheat govt, says inquiry; got funds anyway

(Express photo by Prashant Nadkar/Files/Representational)

THE Maharashtra government granted financial assistance to two cooperative textile companies despite a 2014 inquiry report concluding that the two firms had committed fraud in depositing their own share capital as required in the National Cooperative Development Corporation (NCDC) scheme. Not only did the two companies withdraw money multiple times over seven years from what was stated to be the members’ share capital for the project but one company also transferred almost its entire share capital by cheque to the other, which the latter then presented to officials as evidence of its share capital.

In July 2015, Chief Minister Devendra Fadnavis asked the state cooperation minister to disburse the funds after he received a letter from Sudhir Dhuttekar, a special invitee member to the Maharashtra BJP, seeking that the two societies be considered for the assistance. Documents obtained by The Indian Express under the Right to Information (RTI) Act show that the Textile Department granted Rs 1.46 crore each to the two cooperatives by tweaking norms after Fadnavis directed that funds be disbursed.

In addition, nearly two years since receiving the funds, neither society’s textile unit has started functioning. In February 2009, the Tararani and Sai Mahila garment co-operative societies in Kadaknathwadi village in Osmanabad’s Vashi tehsil approached the Textile Department for assistance under the NCDC scheme for their garment units, pegged to require a total investment of Rs 4.52 crores each. continued on page 9

The NCDC scheme offers assistance to cooperative units in the form of reimbursement —- the state releases assistance and claims reimbursements from the corporation. The beneficiary societies are required to raise 10 per cent of the investment as members’ share capital on their own. In July 2014, an inquiry report found irregularities in the members’ share capital deposited by both societies. The inquiry was ordered after a complaint alleged a scam in the financial assistance sanctioned by NCDC. The report said the share capital for Tararani Mahila Society, Rs 46.60 lakh, was deposited in the Anandnagar branch of the Bank of Maharashtra, not in the society’s name, but in the joint account of society chairman and secretary.

The inquiry report said the society also withdrew Rs 45 lakh and gave this money to 233 members on the condition that they would return it when required. “Though the amount is deposited in the joint account of chairman and secretary as per bank certificate dated June 27, 2014, the society has not provided the passbook and bank statement for inquiry despite repeated requests.

So, it is difficult to say whether the amount is deposited in the account,” noted the inquiry report. A department note prepared in August 2014 reiterated the inquiry report’s findings. It said the society withdrew funds from what was supposed to be their share capital after the board of directors passed such a resolution. Meanwhile, the Tararani Mahila Society submitted its bank statement from July 2, 2008, to January 30, 2014, of its current account in the Terkheda branch of Osmanabad District Central Cooperative (DCC) Bank. On August 30, 2014, the department noted that the passbook entries showed Rs 45 lakh deposited on July 2, 2008, in the society’s current account in the DCC Bank’s Terkheda branch.

The next day, a cheque for the entire sum was given to Sai Mahila Society. Again, Rs 45 lakh was deposited in the account on July 8, 2008, and withdrawn through a cheque. On February 9, 2009, again Rs 45 lakh was deposited and was withdrawn two days later through a cheque. In 2014, Rs 45 lakh was deposited through a transfer on January 29 and was transferred to Sai Mahila on January 30. “It is clear that the one society members’ share capital was deposited in bank accounts of different societies and it was withdrawn after procuring the deposit certificate from the bank on the same day,” the department noted on August 30, 2014.

“It raises a doubt that to get the share capital and loan from the government, the same amount was being deposited in different societies’ names in an attempt to cheat the government. So, the matter needs to be investigated thoroughly and the orders for an inquiry should be given to the District Deputy Registrar (DDR) of Osmanabad,” the note added. Subsequently, on the instructions of the textile department, the district deputy registrar of Osmanabad conducted his own inquiry and submitted a report in November 2014 confirming that Tararani Mahila and Sai Mahila had not sought the registrar’s permission to withdraw the capital amount.

But neither society had until then received any financial assistance, so they couldn’t be termed as having cheated the government, the report noted, adding that no criminal action was warranted. At that point, the balance in the Tararani Mahila Society’s account in the Anandnagar branch of Bank of Maharashtra was Rs 5,179 while the balance in the Sai Mahila Society’s accounts in Anandnagar branch of Bank of Maharashtra was Rs 5,360. A subsequent report by the Textile Director on November 27, 2014, said the societies are not eligible for the assistance. In March 2015, the department also recommended through a note that it would be appropriate to take the opinion of the law and judiciary department on whether criminal action against the two units could be initiated. But records show that the opinion of the law and judiciary department was not sought.

After Sudhir Dhuttekar, a special invitee member of the Maharashtra BJP wrote to Chief Minister Devendra Fadnavis on July 21, 2015 requesting disbursal of funds to four women’s garment societies including Tararani and Sai Mahila, the proposals were reconsidered by the Textile department. “Minister Cooperation check immediately and disburse it,” Fadnavis noted on Dhuttekar’s letter dated July 21, 2015.

Between January and March 2016, a fresh note proposed a first installment of Rs 1.46 crore to the two societies, saying the money withdrawn from the members’ share capital would be recouped. Three months’ time was given to the society to fulfill the condition of the directors’ properties to be kept as guarantee. Subsequently, the first installment of Rs 1.46 crore was granted to both societies. Nearly two years later, both societies have shifted location of their units, citing better business prospects. While the Tararani garment unit was moved to Latur, Sai Mahila has moved to Pimpla Budruk village in Tuljapur, Osmanabad. Production of garments has not begun in wither unit. When contacted, Duttekar told The Indian Express that the societies approached him and as he “knows the CM personally”, and he chose to take up the issue.

“The funds were granted as per the norms,” he said. Chandrakant Patil, then Co-operation and Textile Minister and current Revenue and PWD Minister, also maintained that approvals were given as per norms. “CM had noted to disburse the funds and the department also prepared a proposal based on it. I just gave approval to it. There is no wrongdoing,” Patil told The Indian Express. In a written response to The Indian Express, the Chief Minister’s Office (CMO) said it was the responsibility of the Textile Department to verify details of the societies. Confirming Duttekar’s letter and the CM’s remarks, the response said, “Even if there are CM’s remarks on it, the departments should act as per the rules after verifying the other side.”

The CMO also said it is mandatory to refer such matters to the CM if they are not as per the norms but this file did not come to the CM for approval. “However, if there is any irregularity in it, the textile secretary will be asked to conduct an immediate probe into it and submit a report within a month,” the written response said. Meanwhile, both societies’ representatives conceded that production work in their units would commence shortly. Madan Jadhav, secretary of Tararani garment society, admitted that the share capital was shared between his society and Sai Mahila society. “But the government decided to grant us funds after allowing us to deposit the members’ share,” he said. Madan’s wife Anjali is a corporator in the Ichalkaranji Municipal Council from Shahu Aghadi, her candidature reportedly backed by the BJP. He said work in the factory would be completed by June and 300 women would get employment. Anil Divate, secretary of the Sai Mahila garment society, said that they have been able to construct up to plinth level and the work would be fast-tracked soon.