Tarnishing the image of the co-operative movement once again, four Bangalore-based Credit Cooperative Societies have been found to be indulging in gross irregularities and siphoning-off funds of depositors. This was revealed during a raid by the Income Tax Department.
These credit co-ops are Siri Vaibhava credit cooperative society, AKPS Credit Cooperative Society, Sri Gopala Krishna Credit Cooperative Society, and Arjun Credit Cooperative Society.
Co-operators from Karnataka say they are small credit co-ops but they do admit that small or big their misdeeds have ramifications for the entire cooperative sector. “Promoters of these co-ops must be shunned and should not be invited to any co-op gathering, many felt.
According to the IT release, the promoters of these Credit Co-ops took advantage of the relaxed KYC norms and opened several accounts without obtaining PAN. The promoters have misused these institutions for their personal benefit. The investigations have also revealed systemic distortion of the legal framework by them.
Apart from the general irregularities noticed in their functioning, various unfair practices adopted and modus-operandi of tax evasion have been noticed during the course of search operations. One such credit co-op has been facilitating its clients to book bogus expenses by returning the amount in cash, which had been received by cheque from its clients.
The said credit co-op has also enabled the laundering of unaccounted money by accepting cash deposits from its clients and returning the proceeds to them through RTGS. The said CCS has also been found to be engaged in providing short-term loans at very high rates of interest to some of the non-members of credit co-op. Needless to mention that the credit co-op does not have requisite approval for carrying out the business of lending.
Certain instances of issuing fake Fixed Deposit (FD) certificates by another credit co-op to its clients in exchange for certain commissions collected in cash have also been found. Such FD certificates have been used as collateral by its clients for obtaining loans from financial institutions/Commercial Banks.
The promoters of one of the credit co-ops have indulged in diverting the deposits made by genuine members by extending large loan amounts to the entities controlled by them or to their associates. Also, more than 100 benami accounts in the names of employees and others have been detected and such accounts have been placed under restraint.
One of the clients of a credit co-op, who is engaged in the business of buying old gold from customers, has been found to be indulging in suppression of sales leading to escapement of income to the tune of Rs 20 crore in these transactions. The books of account relating to such undisclosed transactions have been discovered by the search team in a secretly maintained web-based server.
Further, undisclosed investment in immovable properties aggregating to about Rs. 130 crore in the name of the chairman/ promoters of these credit co-ops, entities controlled by them and a few benami persons have also been discovered.
The search action has resulted in the seizure of unaccounted cash of more than Rs. 4 crores. Further investigations are in progress, says a govt release.