The account of XYZ Company continued to be a headache to us. As stated by me earlier, the right issue refund order account was overdrawn and the liability started mounting day by day as the refund orders continued to be presented through the clearing house. We sent a detailed report to the Circle Office highlighting the fact that the company was not furnishing the actual position of the excess subscription received and the actual amount of refund orders issued against the same. The overdrawings reached about Rs27 lakh ultimately.
Meanwhile the financial position of the company had totally deteriorated. But it continued its existence by submitting supply bills for discount occasionally for the payment of salaries and other maintenance expenses. We started seeking the permission of each transaction in the account. We used to allow drawings only with due permission from the Circle Office. We used to refer to each proposal as a part of a ‘Holding On’ operation! The DGM was obliged to give permissions in the absence of clear instructions from CMD.
Through our persistent efforts ultimately it came to light that the company had opened a current account with our A R Street, Mumbai Branch and routed some right issue subscription amount through it. It had diverted the entire proceeds somewhere and had issued the refund orders against the same on our branch. That was the reason for the overdrawings at our branch. This was nothing but a clear case of cheating by the company. We called for an explanation from the company and reported the matter in detail to the Circle Office and sought their instructions.
While we were expecting the Head Office to take some steps to discipline the company, no such thing took place. On the other hand, the MD of the company complained to the CMD that the branch was harassing the company! As a result, the name of our DM Kulkarni did not find a place in the list of promotees to the AGM cadre. In fact the DM was officially called to the Head Office and told by the CMD that his promotion was not cleared for mishandling the account of XYZ Company. That was the type of clout the company enjoyed with our CMD!
After some time Kulkarni was transferred from the branch and a gentleman called Menon was posted in his place. Menon had earlier worked in the Industrial Advances Section of our Head Office. While he knew all the nuances of handling the working capital limits, he was a master in ensuring that no accountability was fixed on him personally! He had picked up this special skill while working at the Head Office! Of course he did not mind if the same was fixed on his juniors! Our Senior Manager Kudva had also picked up this trait while working at the Circle Office. He was also a master in passing on the responsibility to the officers working under him. The two were in fact a dangerous combination for me and my other officers. This was proved in another case that I would come back later. Having worked with a gentleman like B R Nayak, who took it upon himself the protection of people working under him, this was a totally new exposure for me.
As far as the account of XYZ Company was concerned, the methodology followed by Menon was indeed quite innovative. He specifically instructed me not to use the word ‘recommend’ in any of our proposals. His argument was that since all the proposals were first discussed by the company at the Head Office and were submitted to us only later, there was no question of any recommendation from the branch. Accordingly I started mentioning in each proposal that it has already been discussed with the officials in HO and we may be permitted to allow the facility as already agreed! Quite surprisingly our Circle Office did not question the wordings of such proposals.
It was clear that the company was in no position to clear the overdrawings in the rights issue account. At the instance of our CMD, a subsidiary of our bank was asked to allow a loan facility against the security of equity shares held by the promoters. The officials of the subsidiary were obliged to sanction the facility. But the company submitted another request to our bank asking a portion of the loan to be released for its working capital needs. Even this request was permitted by the CMD and as a result we could only get a portion of the overdrawings cleared from out of the loan sanctioned by the subsidiary.
A stage was reached when we had to run to HO for every single proposal of the company. The MD of the company used to first get an oral sanction from the CMD. We were being summoned by the General Manager in-charge of credit at the Head Office. I had to accompany our DM to meet the GM at his chambers with absolutely no idea about the proposal that would be thrust on us. Our Circle Office DGM would join us by then. Every time we had to brief the GM about the current position of the accounts of the company. It became a routine for us to tell him that there was absolutely no change in the position of irregularities in the accounts.
The GM used to invite some other GMs for discussions to get some moral support. All of them were aware that the GM in-charge of credit was helpless in the face of orders from the CMD. The seriousness of the situation was being reflected on their faces. They would ask the GM (Credit) the same question every time – “Kithle dee moon sangla”? (“How much you have been asked to sanction”?). The reply used to be – “Tha lakh moon sangla or paanch lakh moon sangla” (I was asked to sanction Rs10 lakh or Rs5 lakh). They would all then say “kassan maaraaya? (What is this - man?). The GM would then ask us to allow overdrawings of Rs5 lakh or Rs10 lakh as instructed by the CMD.
I had made it a point to ensure that all the oral/telephonic sanctions from HO/CO were duly confirmed in writing. As the Circle Office officials hated reminders from the branches in view of the hierarchy, I was listing out such pending sanctions in the fortnightly reports to CO/HO. That served the purpose of reminders and also indirectly served the purpose of putting on record that such sanctions had been given.
The retirement of the CMD and appointment of another CMD in our bank made only a marginal difference to the company. The position of irregularities continued till I left the branch on promotion as Senior Manager in June 1990. I continued submission of the fortnightly reports till I left the branch. After some more years the account became totally sticky. A special team from the Circle Office was asked to conduct an in-depth study to fix the responsibility. The fortnightly report came in handy at that time. The team concluded that the sanctioning authorities were aware of all the irregularities in the accounts of the company. There was nothing that was not known to them while allowing the limits to continue and sanctioning additional limits. The team also found that all the adhoc facilities and deviations from sanctions were having specific sanctions from the relevant authorities. It gave a clean chit to the branch and absolved the branch officials from the primary responsibility, which would have been otherwise fixed on them as a matter of routine!
------- (To be continued)A V Krishnamurthy