Pen bank case: ED gets court nod to return Rs 290cr assets to affected depositors

Mumbai: In a significant development involving a decade-old case, a special court has approved Enforcement Directorate‘s (ED’s) plea to restitute nearly Rs 290 crore worth of attached assets of Pen Co-operative Urban Bank Ltd, which can be paid to depositors who suffered financial losses in the associated money-laundering case.
The case affected two lakh depositors and 42,000 shareholders of Pen Co-operative Urban Bank Ltd, then controlled by one of the accused, Shishir Dharkar, former mayor of Pen in Raigad district and son of former minister late Prabhakar Dharkar.

In 2014, the ED attached these properties, including several benami assets. Following a depositor’s petition in 2017, the court directed the ED to transfer the property to competent authority under the Maharashtra Protection of Interest of Depositors Act (MPIDA) to be distributed among the depositors. The ED secured a stay through Supreme Court, but faced challenges maintaining the attached properties, including land parcels. Police investigate cases under MPIDA and attach assets which are later auctioned to be distributed to the investors.
According to Friday’s ED press release: “In the larger interest of depositors and currently ongoing restitution efforts, ED took a pragmatic view and decided to withdraw the SLP before the apex court. Consequently, an affidavit was filed before the apex court which was allowed and SLP was withdrawn.”
The ED then submitted an affidavit to the special Prevention of Money Laundering Act (PMLA) court in Mumbai expressing willingness to return the properties. On Tuesday, the court ordered the restoration of 29 immovable properties, currently valued at Rs 289.54 crore.
The case involves allegations that former office-bearers defrauded the bank through private investments. They allegedly conspired with bank auditors to manipulate accounts, falsely reporting profits and causing Rs 651.35 crore in losses. ED probe revealed criminal proceeds were channelled through bogus cash credit accounts using cheque discounters, with some funds used to purchase benami properties in Raigad district.
In the recent past, the ED successfully implemented asset restitution to victims. Due to the delay in the framing of charges in the cases to comment on the trials, the agency adopted “the substitution of assets through bank guarantee approach”. The ED, with court permission, provides NOC to the victim banks to dispose of the attached assets after furnishing a bank guarantee of a similar amount, which will be utilised according to the case outcome.
Usually, the ED substitutes assets under PMLA Section 8 (7), applicable when charges are framed or accused persons are declared proclaimed offenders, similar to the Vijay Mallya case. The substitution method was implemented in various cases, including the return of hypothecated gems-jewellery worth Rs 60 crore to State Bank of India in the Musaddilal Jewellers Pvt Ltd case in Hyderabad, and the Rs 263 crore Shine City Group ponzi scheme in Uttar Pradesh.