The Calicut Bank Limited

T.M. Appu Nedungadi (courtesy: wikipedia)

Calicut can take legitimate pride as the city that gave birth to the first private sector commercial bank to be set up in South India - the Nedungadi Bank. The versatile genius of Rao Bahadur T.M. Appu Nedungadi could recognise the future of Calicut as the commercial centre of Malabar at a time when its importance as an export hub had all but vanished. Thus Nedungadi Bank came to be established in 1899. However, the Bank came to be incorporated only in 1913.
The claim of being the first bank to be incorporated goes to the Calicut Bank Limited which was registered in Calicut in 1908. The Bank prospered and had at one time 13 branches in British India, one branch in Cranganore (which was in the Cochin State) and an overseas branch in Colombo. Its issued capital was Rs. 2,77,280 divided into 27,728 fully paid shares of Rs. 10 each. After 30 years of successful functioning as a commercial bank, disaster struck in the form of a run on the bank forcing it to draw its shutters on 16th August 1938. (It was around the same time that the Travancore National and Quilon Bank also suffered a run and had to be liquidated, although there were political reasons also for the failure of that bank.)

The Directors of the Bank filed before the court a scheme of voluntary liquidation on 19th August 1938. The proposal meant that depositors would get only two annas to the rupee of deposit at maturity; another eight annas to the rupees would be payable in the next 4 years; two annas would be converted to shares of the bank and the remaining four annas would be written off.

This was opposed by one Devani Ammal and others who filed a petition for compulsory winding up.  Mr (Justice) Gentle of the Madras High Court appointed M/s Fraser and Ross as  provisional liquidator. The picture brought out by the liquidator was alarming : the company's liabilities amounted to Rs. 15,58,830 and its realizable assets to Rs. 10,52,955 leaving a deficit of Rupees 5,05,874.

The report further revealed the culpability of certain directors, their friends and relations who had obtained advances from the bank to the extent of Rs. 5,19,372 of which Rs. 4,54,611 was considered to be irrecoverable.  The figures reported did not include the details of two branches at Cranganore and Colombo which did not send any statements. Inquiries by the liquidator brought out another shocking fact - a sum of Rs. 17,000 had been withdrawn by the manager of the bank from the funds at Cranganore and Colombo even after the liquidator had been appointed.

The Court also found that  the directors and their friends had received large advances from the company and most of these advances are considered to be irrecoverable. Another factor which weighed with the Court was that the management had not placed all the facts before the depositors and there was also a possible attempt by some directors to mislead the shareholders and other interested parties. Considering all these factors, the Court concluded that only a compulsory winding up would bring out the culpability of the directors and officers and protect the interest of the customers.

Note: The above details have been culled from various reported court cases published in the Indiakanoon website. There are several gaps in the story ( who were the promoters, directors etc.) which readers may be able to fill in.)