Andaman Bank Scam: Power of Attorney Misused for Loans

Investigations into the Andaman and Nicobar State Cooperative Bank Ltd (ANSCBL) loan scam have exposed a sophisticated scheme involving the misuse of 'power of attorney' (PoA) documents to secure over Rs 80 crore in loans, implicating former Congress MP Kuldeep Rai Sharma and several associates. The scam, which has ballooned to over Rs 500 crore in fraudulent loans across more than 100 accounts, reveals gross violations of banking protocols, officials said on Monday.

A senior police officer disclosed that the majority of loans were sanctioned against properties mortgaged through PoA agreements, despite a 2020 ANSCBL circular explicitly banning such practices due to legal disputes. “It’s alarming that the bank’s top management approved loans on PoA-based mortgages, flouting their own policy,” the officer said. PoA for land allows a designated person to manage property transactions on behalf of the owner, often used when owners are abroad, unwell, or elderly. In this case, individuals holding PoA secured hefty loans without the knowledge of actual landowners, leading to disputes when owners objected.

The ANSCBL notification (StCB/MD's Secretariat/2020-21/30) dated November 23, 2020, stated: “Many loan applications are received by way of mortgage of landed property through power of attorney... legal disputes arise due to such mortgages. No loan shall be issued on this basis with immediate effect.” Despite this, loans were disbursed, exposing the bank to significant financial risk.

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The Andaman and Nicobar Police lodged an FIR on May 15 against Sharma, the bank’s former chairman, along with board members, directors, and beneficiaries. Sharma, who served as ANSCBL chairman and MP from 2019 to 2024, was arrested on July 18 from a private hospital in Port Blair, where he was admitted for health issues. Since June 25, eight individuals have been arrested, including ANSCBL managing director K. Murugan, employee Kalaivanan, and directors of shell companies like Andaman Mormon Infrastructure, Blair Enterprises, and Andaman Treepie Adventure, as well as tour operator M. Sajid.

The Enforcement Directorate (ED) launched its first-ever raids in the islands on July 31, targeting nine locations in Port Blair and two in Kolkata. The ED’s probe revealed that over Rs 500 crore was siphoned through fraudulent loans, often funneled to shell companies benefiting Sharma and others. Incriminating documents and property records worth over Rs 100 crore were seized, with 10 individuals summoned to Kolkata for questioning.

The investigation, sparked by a complaint from the deputy registrar of cooperative societies, uncovered additional irregularities, including inflated property valuations and ignored CIBIL reports. The ED and police are now tracing money trails, with some funds allegedly transferred to accounts of unrelated individuals, such as a driver and a tea stall owner. The probe continues to unravel the full scope of the scam, raising concerns about governance in cooperative banks.

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