The Chairman and Managing Director of real estate developer HDIL were arrested on Thursday in connection with the Rs 6,500 crore loan default case that has hit the Punjab & Maharashtra Co-operative (PMC) Bank.
Accordingly, Rakesh Kumar Wadhawan, the Chairman, and Sarang Wadhawan, Managing Director of HDIL were arrested by the Economic Offences Wing (EOW) of the Mumbai Police.
Besides, the assets of HDIL worth Rs 3,500 crore have also been frozen.
BJP Maharashtra Vice President and former Mumbai MP Kirit Somaiya added that the Mumbai Police EOW will also arrest PMC Bank's Chairman Wareyam Singh and former Managing Director Joy Thomas.
Last week, the Mumbai Police EOW had registered an FIR against senior officials of HDIL and PMC Bank over allegedly causing losses to the tune of Rs 4,355.43 crore to the bank.
The FIR mentioned PMC Bank's MD Thomas, Chairman Singh and other executives. It also mentions involvement of Sarang Wadhawan, the Vice Chairman and Managing Director of HDIL.
The EOW had also appointed a special team to carry out investigations into the case.
As per the complaint, the bank officials, between 2008 and 2019, deliberately violated banking norms and showed false profits to mislead the authorities, although the bank was actually incurring losses.
It also said that the bank also veiled the group's large exposure and non-performing assets (NPAs) from the Reserve Bank of India (RBI) by creating dummy accounts.
The bank had allegedly opened a number of dummy accounts to replace the stressed accounts held by Wadhawans-led HDIL.
Last week, the RBI barred the Punjab & Maharashtra Cooperative Bank Ltd (PMC), Mumbai from carrying out the majority of its routine business transactions for a period of six months, sparking panic among the depositors and sending shockwaves in the city banking and business circles on Tuesday.
In a letter to RBI, Thomas admitted large-scale wrongdoing and the cover-up exercise.
"Some of the large accounts were not reported to RBI from 2008 because of fear of reputational risk," Thomas has revealed in his letter.
He said that in 2011, the size of the bank was around 57 branches with deposits of Rs 2,824 crore and advances of Rs 2,000 crore. The exposure of HDIL group was then Rs 1,026 crore. "Had we classified them as non-performing assets, we would have to stop charging interest on these accounts and we could have made losses. The growth part of the bank would have got hampered."
Thomas, however, said that the bank is still optimistic about the repayment plan of HDIL group and the group always promised to clear the dues and gave backup security to back their loans. The letter further said: "Every year during the course of RBI inspection we undergo a lot of stress due to concealment of information from RBI. It was worrying each of us."