Compensation process of Oriental Cooperative depositors beginsA high-level committee formed to manage troubled cooperatives has sought applications from depositors, who lost money following the collapse of Oriental Cooperative, to initiate the fund recovery process.
A high-level committee formed to manage troubled cooperatives has sought applications from depositors, who lost money following the collapse of Oriental Cooperative, to initiate the fund recovery process.
The application for fund recovery can also be filed by shareholders of Oriental Cooperative; those who booked apartments from promoter of the cooperative, Sudhir Basnet, and his business partners; and those who extended credit to the cooperative, Basnet and his business partners, according to the high-level committee The Problematic Cooperative Institution and Association Management Committee, led by former Special Court judge Gauri Bahadur Karki, started accepting applications from Sunday. The applications can be submitted till May 20 at offices of the district coordination committees based in Biratnagar, Birgunj, Bhaktapur, Pokhara, Nepalgunj, Surkhet and Dhangadi. Applications can also be submitted at the head office of the Troubled Cooperative Institution and Association Management Committee in Pulchowk.
While seeking compensation, applicants must submit copies of deposit slips, share certificates, apartment booking slips, statements of fixed assets used as collateral, receipts extended at the time of issuing credit and citizenship certificates, the high-level committee said.
“Once we get these documents, we will go through them and find out a way to compensate the victims,” said Karki, adding, “We are still in the process of evaluating assets of Oriental Cooperative, its subsidiaries and apartment projects undertaken by Basnet.”
Depositors of Oriental Cooperative had lost at least Rs5.2 billion following its collapse in 2013. The cooperative had gone bust after its key promoter, Basnet, illegally invested depositors’ money in the real-estate market, which later crashed. The financial health of the cooperative had also deteriorated because of unsound lending practices and financial irregularities. It was also illegally operating branch offices in various parts of the country, which was a breach of the principle under which cooperatives are established.
At that time when the cooperative went bust, it was also selling apartments and housing units via Oriental Builders and Developers. The company was involved in development of over half a dozen housing and apartment projects in the Kathmandu Valley, including Oriental Colony, Chakrapath Heights at Basundhara, Dhumbarahi Apartments Phase 2, Bagmati Apartment at Sankhamul, Eastern Apartment at Kausaltar, Vegas City at Balkumari, Imperial Apartment at Naxal and Sanepa Height Apartment, among others.
Many people who had bought apartments from Oriental Builders and Developers and companies affiliated to it had complained that the firm had collected advance payment from them but had failed to deliver the apartment units.
At that time when these incidents took place, at least 155 other financial cooperatives had also gone bust largely because of unsound lending practices, exposure to the real-estate market and involvement of promoters in embezzlement. The government had then formed a high-level commission under Karki to launch inquiry into malpractices of savings and credit cooperatives. The commission had later declared 71 cooperatives “problematic”.
However, the Cooperatives Act of that time did not give authority to the government to declare any cooperative “problematic”. So, the label attached by the commission on troubled financial entities was “symbolic”.
But the new Cooperatives Act, promulgated by Parliament last year, has given authority to the Ministry of Cooperatives and Poverty Alleviation to make that declaration.
Referring to the new Act, the government formally declared Oriental Cooperative “problematic” in November and immediately initiated the process of setting up Problematic Cooperative Institution and Association Management Committee.