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April 2, 2001
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Money > Business Headlines > Report April 2, 2001 |
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Bank of India discounted Rs 24 billion pay orders in 9 weeksTamal Bandyopadhyay Tech Bull Ketan Vinoobhai Parekh used Bank of India (BoI) to discount 248 pay orders worth Rs 24 billion in nine weeks between January 3 and March 9. Of this amount, Rs 11.95 billion were routed to three shell companies-Nakshatra Software Pvt Ltd, Chitrakoot Computer Pvt Ltd and Goldfish Computer Pvt Ltd. These pay orders were issued not only by the Mandvi branch (near Masjid Bunder in south Bombay) of Madhavpura Mercantile Cooperative Bank, but also by the Fort branch of Standard Chartered Bank, UTI Bank and Global Trust Bank, where Parekh ran a string of accounts. Parekh and his associates siphoned off Rs 4.35 billion from the account of Panther Investrade Ltd to Nakshatra Software, Rs 3.96 billion from Classic Credit to Chitrakoot Computer and Rs 3.64 billion from Panther FinCap Management Services Ltd to Goldfish Computer. These three software companies are owned by Parekh and his family. Parekh operated seven accounts with Bank of India's Bombay Stock Exchange branch: Panther Investrade (current account no 16297), Panther FinCap & Management (CD a/c no 16301), Classic Credit Ltd (CD a/c no 3198), VN Parekh Securities Pvt Ltd (CD a/c 22291), KNP Securities Pvt Ltd (CD a/c no 11359), Classic Share & Stock Broking Pvt Ltd (CD a/c no 3113) and Luminant Investments Pvt Ltd (CD a/c no 12058). According to sources, Parekh ran accounts in StanChart, GTB and UTI Bank as well, besides some other banks. Parekh and his group companies used to produce pay orders issued by the above mentioned banks in favour of three accounts -- Panther Investrade, Panther FinCap & Management Services and Classic Credit. Bank of India went on discounting these pay orders (at an interest rate of 18.5 per cent) till March 8, up to which point no bank failed to honour the pay orders. On March 9, Madhavpura went bust and BoI was left holding pay orders worth Rs 1.37 billion, which were not backed by any fund. Pay orders are normally honoured in view of the fact that the instruments are issued by banks for the value received, and after ensuring that funds are earmarked for payment of such instruments.
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