Yet another cooperative bank — The Greater Bombay Cooperative Bank —has been accused of misusing public funds and irregular sanction and disbursement of loans by its top management; but this time there is a twist. Vijay C Lalwani, who is attempting to blow the whistle on a variety of financial irregularities alleged by him and communicated to RBI is a director of the bank. But so far, the regulator has stayed out of the picture, while Lalwani fought a long legal battle to stop the bank’s Chairman, Narendra Baldota, from removing him from directorship. The allegations made by Lalwani are serious. He accuses the bank of renting the Chairman’s property as office premises and paying twice the market rate. He charges the bank with splurging Rs 10 crore on advertising contracts that went to the Chairman’s relative at Bangalore. And he says that money was lent to several relatives in Madhya Pradesh, which is outside the jurisdiction of the bank. Some of these loans have turned into NPAs, says Lalwani. The cooperative bank in turn has worked hard to remove Lalwani as director. He approached the cooperative court and obtained a restraining order. The bank challenged this decision, but the appellate court also rejected its stand. It then approached the High Court, where its appeal was “dismissed as not pressed” (March 18,2004) on the understanding that it can approach the Registrar of Cooperative Societies to sack Lalwani as director. The matter gets complicated, because the bank in turn has alleged that Lalwani’s actions are motivated and arise out of the bank’s action to recover loans extended to his brothers. Clearly, the allegations and counter allegation need urgent attention and action by RBI to protect depositors’ interest. So far, the RBI has merely forwarded Lalwani’s allegations to the bank (On February 11, 2004) and sought its comments.
The aftermath
The secondary market seems to have brightened in readiness to felicitate Arun Shourie on Monday for his successful disinvestment programme. But many key partners to the process remain wary and disgruntled. While investors are watching the secondary market prices with trepidation and praying that Friday’s rally will sustain, the government’s investment advisors are still smarting over the threat to unleash the Intelligence Bureau on them. Especially since the fees paid by government have been a mere pittance and their last minute scramble to hard sell the issues has put them out of pocket. Some say that they have actually ended up with a loss, both in terms of money as well as prestige. But they are not the only losers. The Reliance family, which made a huge investment in the ONGC offer has been allotted a tiny slice of shares.
Coca-Cola woes
Life doesn’t seem to get better at Coca-Cola. The company emerged relatively unscathed from the pesticide controversy in India, but is facing much worse music overseas. On March 20, The Guardian of London reported that the entire stock of brand new bottled water Dasani -was pulled off the shelves in UK because it had been contaminated with bromate, a cancer-causing chemical. The paper says that this is a relatively harmless, naturally occurring trace chemical, which has a sedative effect; but when it is oxidised into bromate it becomes “nasty carcinogen”. Earlier in the month, says the newspaper, Coke’s claim to a “sophisticated purification process” based on NASA spacecraft technology proved to be just reverse osmosis. And its ‘pure’ bottled water turned out to be treated tap water taken from the mains. Coca Cola has however pointed out to the media that it has voluntarily withdrawn stocks of the bottled water in UK and had even set up a toll free line to expedite refunds.
Price rigging?
Check out the price of Infosys on the bourses last Thursday, which marked the Futures and Options settlement on the National Stock Exchange. After opening at Rs 5050, the scrip traded steadily until it suddenly shot up to Rs 5600 in the last 10 minutes of trading, in what seemed like a single hit on the terminal. In comparison, the stock closed at Rs 5166.10 after touching a high of Rs 5220 on the Bombay Stock Exchange. The NSE trade had an immediate impact on the NIFTY, which rose a hefty 12 points because of the Infosys trade effect. If the price were genuine, traders would surely have taken advantage of an arbitrage opportunity. But if it was manipulation, the NSE needs to catch the culprit and cancel the trade.
-- Sucheta Dalal
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