The Kerala High Court has directed the Enforcement Directorate (ED) to investigate allegations of financial fraud involving the Kollam-based Edamulackal Co-operative Bank.

The allegations pertain to the misappropriation of public deposits amounting to ₹24.44 crores during the period from 2009 to 2017. A Division Bench comprising Justices Amit Rawal and KV Jayakumar observed on December 4 that the case prima facie involved offences of breach of trust and cheating, both of which are classified as scheduled offences under the Prevention of Money Laundering Act (PMLA). This classification enabled the ED to step in and probe the matter. "We thus direct the Enforcement Director to register an ECIR as provided under the Act against all the persons involved, for misappropriation, breach of trust, cheating as well as offences under the PC Act forthwith," the Court stated.

An earlier order by the Court on December 3 described the case as a glaring instance of financial misconduct, where members of the cooperative society's committee allegedly misused depositors' money. "Out of many depositors, few of them are facing not only financial hardship but medical difficulties like cancer and other diseases," the Court noted. Among the affected depositors was 71-year-old Rajendran Unnithan S, a cancer patient who had approached the Court after being unable to withdraw his fixed deposit of ₹9.4 lakhs for medical treatment.

In light of the petitioner’s urgent medical needs, the Court ordered the cooperative society to immediately transfer the required funds. "He is in immediate need of money and matured amount according to his calculation is about Rs.9,40,000/- and in Savings Bank Account Rs.56,370/-. Since the Grade IV society has a deposit of minimum Rs.1,50,00,000/-, we direct the Society to immediately either issue a pay order or transfer the amount through RTGS in the account of the petitioner as he is in immediate need to meet the expenses of the treatment," the Court instructed.

Additionally, the Court learned that several other depositors had pending dues ranging between ₹1.47 lakhs and ₹21.60 lakhs. It ordered the cooperative society to release 50% of the outstanding amounts to these individuals. The Court also reviewed a 2017 first information report (FIR) filed under Sections 406 (cheating), 409 (breach of trust), and 420 (criminal conspiracy) of the Indian Penal Code (IPC). However, the FIR named only a former Secretary as the accused, despite allegations implicating at least 14 individuals in the fraud.

"It is wholly intriguing as to how and in what manner the other surcharge persons have been let off with no criminal case," the Court remarked. The Bench called upon the Home Secretary and the Additional Chief Secretary of the Co-operative Societies Department to clarify this apparent oversight by submitting an affidavit. It further requested the State and Co-operative Societies Department to provide updates on the progress of both the 2017 FIR and the surcharge proceedings initiated under the Kerala Co-operative Societies Act.

Cause Title: Rajendran Unnithan S v The Registrar of Co-operative Societies & ors.

Date: December-04-2024

Bench: Justice Amit Rawal, Justice KV Jayakumar

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