Legal rows likely to prevent MMCB from recovering Rs 375 cr

The beleaguered Madhavpura Mercantile Co-operative Bank Ltd (MMCB) might not be able to recover around Rs 375 crore from borrowers because of legal wrangles.

Loans worth Rs 200 crore have been given without security or technical issues have been raised in court or there are jurisdiction problems in recovery, while the remaining Rs 175 crore are due from two borrowers who have approached the Gujarat High Court.

"There are cases where security has not been sought while disbursing loans or the borrowers have raised technical issues. Such cases involve Rs 200 crore. In addition, there are two cases in the Gujarat High Court, involving Rs 175 crore. It might be difficult for the bank to recover this Rs 375 crore," said bank chairman Jairambhai Patel.

Of the total Rs 2,200 crore receivables, close to Rs 1,200 crore is owed by Ketan Parekh and his group companies.

Patel said that the priority of the bank will now be to recover the dues of those companies other than the Ketan Parekh group companies and also those companies where matters involve jurisdiction or are in courts.

"The top priority thus is to recover the remaining Rs 625-odd crore. Of this amount, the bank will first take up recovery of Rs 237.30 crore, where the borrowers owe the bank a sum of over Rs 5 crore," he said.

He added that there are as many as 28 companies or borrowers who owe MMCB more than Rs 5 crore as on December 31, 2004. Of these, nine companies owe the bank over Rs 10 crore, while the remaining 19 owe the bank a sum of over Rs 5 crore.

The companies that owe MMCB a sum of between Rs 5 and Rs 10 crore are Dakshali Synthetics, Dharmendra Agro Foods, Gravity Textiles, Jethalal Nemchand, Maharashtra Steel Traders, Motiram polymers, Neptune Equipment, Nidhi Diamond Exports, Nilkamal Synfabs, Parikh Spice Products Limited, Prithvi Marketing, Rohit Resins, S P Industries, Sangam Glass Emporium, Sarovar Glass Museum, Shah Bhimani Chemical Limited, Shah Bhimani Packaging and Siddhi Intermediates Pvt Ltd.

The RBI suspended MMCB from the clearing house in March 2001, after a preliminary inquiry revealed that the bank was facing a major liquidity crunch and was in the eye of the pay order scam involving Ketan Parekh.

MMCB has received a fresh lease of life, with the central government extending the time frame of its revival package by one year.