How a bank official used his school buddies to siphon off Rs 6 crore from Dena

Representational Image. Photo: iStock/ AndreyPopov

On April 9, 2014, the Kollam branch of Dena Bank, which merged with Bank of Baroda in 2019, urgently summoned six of its former and existing depositors to the branch. The six -- P C Gopakumar, Hariharan, Sylvi Xavier, his wife Jaya Digna George, Krishnakumar and his wife Deepa -- had no clue why.

A name connected the four males in the group: Balakrishnan Nair, the senior accountant of the bank. The four men were school and college mates of Nair.

At the branch, they saw for the first time what they had virtually forgotten: the title deeds of the properties their friend Balakrishnan Nair had purchased in their names in January 2013.

There was a bigger surprise. Nair stood before them not as the senior accountant but as an accused who has been siphoning off crores from the bank. The friends were told that the land, registered in their names, were bought with funds misappropriated from the bank.

The friends were perplexed. They had indeed loaned large sums of money to Nair when he told them that he desperately wanted some land near his wife’s house at Erumely. But they had never thought of their friend as a fraud.

Gopakumar, an LIC employee, transferred Rs 25 lakh to his friend. Hariharan, who is in pharmaceutical business, gave a cheque of Rs 38 lakh; he had just then won the first lot of a chitty and had Rs 42 lakh in his account. Krishnakumar, who was working in Kakinada in Andhra Pradesh, asked his wife Deepa to transfer Rs 10 lakh to Nair from his ICICI account. Sylvi Xavier, who then was working as an engineer in Nigeria, asked his wife Jaya Digna George to transfer Rs 25 lakh to his classmate.

Soon after, as if to ease any worries they may have had of getting their money back, Nair registered over five acres of the 7.27 acres he purchased in Erumely in the name of his friends or their wives. Only the remaining 2.1 acres was registered in the name of his wife Sindhu K M. "Now you don't have to worry about the money," he told them.

Mystery of title deeds
But none of the friends had seen the land nor the title deed. Sylvi and Krishnakumar did not even ask. When Hariharan had an emergency (his wife met with an accident), Nair quickly paid back Rs 28 lakh of the Rs 38 lakh he had borrowed. He returned all the Rs 25 lakh he had taken from Sylvi. The title deeds, nonetheless, remained in their names. When Gopakumar asked for his, Nair tactfully evaded him.

Two things were clear. One, Nair had no intention of handing over to his friends the land purchased in their names. Two, he was sitting on a mountain of money.

The CBI that investigated the case established that Nair had spent considerably more than is shown in the documents for the 7.27 acres he had purchased. Nair claimed that he had spent only Rs 84 lakh (the fair value of the land) but the seller, a retired professor, confirmed to the CBI, and testified in court, that Nair had paid him Rs 3.08 crore.

‘Smart’ borrowing
If Nair had so much money at his disposal, why did he then borrow money from his classmates? He needed cover. If he had purchased the entire 7.27 acres in his wife's name, it could have alerted authorities. The group purchase made the deal seem normal.

"The circumstances show that the transaction is binamy (sic), and the accused (Nair) could not rule out or explain the suspicions shrouded in the transaction," CBI Special Court judge Rajeev K S said in his order on May 15, which sentenced Nair to seven-year rigorous imprisonment under various sections of the Prevention of Corruption Act.

There was yet another reason why he needed cover. In the year before, he had registered more than six acres in the name of his wife. Purchasing seven acres more would have definitely raised eyebrows. Nair used friends not just to pre-empt suspicion around his land-buying spree but also to loot the bank. It was this loot that gave him the funds to invest in real estate. Once again, his classmates were completely in the dark of Nair's scheme.

How Dena was plundered
Between 2011 and April, 2014, Nair, with the help of the then bank manager P V Sudheer, opened fake overdraft (OD) and loan accounts in the name of his friends and others against unverified fixed deposit receipts to defraud the bank of nearly Rs 6 crore.

The plunder pivoted around the banking mechanism that allows loans to be taken against term and fixed deposits. A branch manager can sanction up to 85% of the value of the deposit receipt as loans.

Once the overdraft/loan account is opened against a fixed deposit, a cheque book should be issued to the customer. But in exceptional circumstances, banks allow customers to withdraw money through a deposit receipt, which can be done only with a special request letter from the customer. Nair cashed in on this exemption.

How he profitably used Sylvi will demonstrate his modus operandi. Sylvi had deposited Rs 1 crore in 12 FD accounts in Dena Bank. But on July 1, 2013, he closed all his deals with the bank. Yet, transactions were carried out in his name not just after July but even a year later in 2014.

On January 17 and April 26, 2013, two fake OD accounts each were opened in the name of Sylvi Xavier, and money was deposited and withdrawn from them. As senior accountant, Nair himself gave the authorisation. On January 17, two fake accounts were opened in his wife, Jaya Digna's name, too.

To open accounts, loan applications have to be submitted. Nair had blank papers with the signature of his friend and wife. (When the loan application was not of a friend, he forged signatures.)

Banking rules stipulate that the original of the FD receipts have to be shown as security for the loan sanctioned. Here, there were only photocopies. (Nair had the photocopies of his friend Sylvi's FD receipts). The CBI found that Nair invariably enhanced the loan amount that could be sanctioned under the fake account by adding third party FD receipts as security without their consent.

And then when the money is withdrawn, the signature of the person who received the money should be on the reverse side of the debit voucher. Since Nair himself took the money, no vouchers had signatures on their backs. (For a senior banker who was in the branch for inspection, these unsigned vouchers were the first hint of a scam.)

Procession of fakes
In similar fashion, Nair operated fake accounts in the name of Hariharan, Gopakumar, Krishnakumar and Deepa, and kept withdrawing amounts. He invested the money in real estate and also used it to close other fake accounts whose period ended. He also opened fake accounts in the name of others who were not his friends. In all, the CBI identified 30 fake accounts. Nair managed to close 20 of them by transferring amounts from the fake OD/loan accounts he freshly opened.

Curiously, bank manager Sudheer, who is also the first accused, was blind to all these violations, and approved these transactions. He was sentenced to two-year rigorous imprisonment. Both Sudheer and Nair were terminated from service in 2015.

The total transactions -- withdrawals and deposits -- taking place in these accounts amounted to Rs 10.42 crore. The bank will recoup its losses of nearly Rs 6 crore by auctioning off the 7.27 acres purchased by Nair at Erumely.

Finally, it looks like Nair’s friends had the last laugh. On May 15, the court ordered that Rs 15 lakh each be paid to Hariharan and Deepa from the fine amount imposed on Nair. The fine of Rs 35 lakh imposed on Nair’s wife Sindhu, who has been given a one-year jail sentence, will go entirely to Gopakumar.

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