As the Lok Sabha elections are approaching, the multi-crore Karuvannur loan scam has become a significant issue for the Left Democratic Front (LDF)-led Kerala Government. Notably, the Enforcement Directorate recently recorded the statements of CPI(M) Thrissur district secretary MM Varghese, ex-MP PK Biju, and Thrissur Corporation councillor PK Shajan. Reports suggest that the statements were recorded during the second investigation phase. This was the second time the ED questioned Varghese after November 2023.
Furthermore, the Income Tax department has also questioned Varghese, after which the department froze one of the bank accounts of the CPI(M) Thrissur district committee. Reportedly, the transactions of the said account did not appear in the party’s annual returns. Contrary to the department’s findings, the party claimed the bank accounts were transparent. Interestingly, the IT department also noticed a recent withdrawal of Rs 1 crore from the same account.
The development came when ED informed the High Court and the Department of Revenue that they found similar fraud in “many other Co-operative societies in Kerala”. These Cooperative societies are often seen as the financial backbone of the state’s rural economy. Thousands of depositors were shaken after money laundering was discovered in CPI(M)-controlled Karuvannur Service Co-operative bank. ED had found five undisclosed bank accounts of CPM leaders in the bank.
In its report submitted to the Department of Revenue, ED shared a list of 12 Cooperative banks where similar irregularities were observed. The banks listed by ED are Thumboor Service Co-operative Bank, Nadackal Service Co-operative Bank, Mavelikkara Service Co-operative Bank, Moonilavu Service Co-operative Bank, Kandala Service Co-operative Bank, Perunkavilla Service Co-operative Bank, Mylapra Service Co-operative Bank, Chathannoor Service Co-operative Bank, BSNL Engineers Co-operative Bank, Koni Regional Service Co-operative Bank, and Marayamuttam Service Co-operative Bank.
Furthermore, the abovementioned 12 Co-operative societies have been booked on fraud charges by Kerala Police. ED said in its report that the depositors and borrowers were quite distinct. The agency said, “In reality, such activity of the Co-operative societies is that of the finance business and cannot be termed Co-operative society. It was also found that Co-operative societies are engaged in granting loans to the public.”
The agency added, “All this is done without any approval from the Registrar of Societies and in violation of the Co-operative Societies Act.” The ED referred to Section 56(o) of the Banking Regulation Act, 1949. It states that no Co-operative society shall carry out banking business in India unless it is a Co-operative bank with a licence issued by the Reserve Bank. Furthermore, ED mentioned that RBI noticed that some “Co-operative Societies/primary Co-operative credit societies are accepting deposits from non-members/nominal members/associate members”.
The agency added, “Other than the board of directors of Karuvannur Service Co-operative bank, the policy matters and the sanctioning of the loan was controlled and regulated by the political sub-committee and parliamentary committee of CPM, which also maintained separate minutes for the sanction of the loans”.
“During the investigation, it was also revealed that illegal loans had been sanctioned to various people at the direction of high-profile political leaders of the CPM,” the agency said.
During the investigation, ED found that the illegal loans taken and not repaid as of 31st December 2022 were obtained from the secretary of Karuvannur Service Co-operative Bank. The total, including accrued entries, was Rs 343 crore, including the principal amount of Rs 188 crore. ED pointed out that due to the illegal diversion of the loan, the depositors were unable to withdraw the money from their accounts, leading to suicides and multiple complaints. Over 400 statements were recorded by the ED during the investigation, and the agency raided 20 premises.
The politics around the loan scam
Financial misappropriation and money laundering in the Left-led bank in Karuvannur are among the major issues being discussed on the sidelines of the Lok Sabha Elections in the state, especially in Thrissur. The Kerala High Court recently criticised the ED for delaying the probe. Congress accused the BJP of attempting to save the prominent left leaders in the matter.
Prime Minister Narendra Modi brought the issue to the nation’s attention and warned that strict action would be taken against those involved. He also promised to return the money seized by the agency to the investors soon.
PM Modi is scheduled to visit Kerala
Prime Minister Narendra Modi is scheduled to visit Kerala on 15th April. He is expected to visit Karuvannur to campaign. Reportedly, the Special Protection Group (SPG) has sought a report from the Intelligence Bureau about the security arrangements in the region.
The multi-crore Karuvannur loan scam
In July 2021, a Rs 100 crore scam was reported in a Co-operative bank controlled by members of the ruling communist party in Kerala. As per an Asia Net report, a financial mishandling between 2014 and 2020 occurred at Karuvannur Service Co-operative Bank. The governing committee of the bank, with 12 CPM members, was disbanded after the details of the scam were released in the public domain. The Iringalakuda police have registered a case against six employees, including the bank secretary. The Bhartiya Janata Party’s state unit complained to the Enforcement Directorate and the Income Tax Department. They have also alleged the involvement of top CPM leaders in the scam.
Lok Sabha Elections 2024
The polling for Lok Sabha Elections 2024 will start on 16th April 2024 and will be in seven phases. Polling is Kerala will take place in the second phase on 26th April. The last phase of polling will take place on 1st June 2024. The results will be announced on 4th June 2024.
