Farmers who have been rendered landless due to loan taken to raise cattle (from left to right), Balaram Adhikari, Kul Prasad Parajuli, Purnakhar Sunar (brother of borrower Khadgaraj Sunar who disappeared after taking loan), Devi Raman Chapagain and Krishna Prasad Adhikari.
How a cabal of money lenders and real estate brokers pulled six farmers of Kaski, a rich landlord of Kathmandu, and a popular singer into debt traps, forcing them to give up their property, an investigation by the Centre for Investigative Journalism-Nepal reveals dark secrets in predatory lending.
CHAPAKOT (Kaski), Oct 24: When Balaram Adhikari, a farmer in a village by the Phewa Lake, toyed with the idea of setting up a grocery store some 18 years ago, he had very few options. He is 61. He didn’t have enough funds. His village also lacked any bank or cooperative that could have supported him. His neighbors had taken loan to raise cattle from a cooperative called Nepal Sahakari Sanstha Limited. The cooperative, which is a two-hour trek from his home, said it could issue a loan only after he pledged four ropani of his farmland as collateral. This was 2001.
Adhikari eventually received Rs 85,000, though on paper his loan amount was Rs 100,000. That’s because he had to pay Rs 10,000 in service fee and Rs 5,000 for the cooperative’s membership. The Maoist insurgency was at its peak, so the grocery faltered. Adhikari defaulted on the repayment of his loan. So, he did what millions of young Nepalis do: he left for Malaysia to work as a laborer.
He started sending money from Malaysia to his wife Parbati Adhikari in Nepal. But after paying two installments, she couldn’t find the cooperative: it had vanished from the area.
The Adhikari family wasn’t the only one worried about the sudden disappearance of the cooperative. Kul Prasad Parajuli, a neighbor, had pledged 10 ropani of his farmland as collateral for Rs 200,000 loans. From 2001 to 2004, six farmers from Chapakot had mortgaged 37 ropani of farmland for a loan of Rs 900,000 to invest in livestock and other small enterprises. While Devi Raman Chapagain had taken a loan of Rs 300,000, others including Krishna Adhikari, Khadga Raj Sunar and Gopal Prasad Parajuli had borrowed Rs100,000 each from the cooperative.
Fourteen years later, the office of the cooperative was tracked down in Kathmandu. But the cooperative, which was mired in financial trouble, had already auctioned off the lands used by farmers as collaterals. They were shocked to realize that they had lost their farmland. “Call it property or source of livelihood, our farm was all we had. We panicked after we found out that we had lost it,” Parajuli said, sitting at his modest home in Chapakot.
According to the Cooperative Act of 1992, the cooperative should notify borrowers to repay loan before issuing 35-day recovery notice, which should also be published in all local government offices of borrowers. But the farmers learned seizure of their property 14 years after their properties were auctioned off as the cooperative published the recovery notice in newspapers not accessible to the borrowers.
Officers of the Nepal Cooperative assured the farmers that they would return the land if they paid the loans together. They travelled to Kathmandu to find out more and spent several months deliberating their options.
On January 11, 2019 all six farmers went to Kathmandu, where they enquired about the unpaid loan. Rakesh Singh, general manager of the cooperative, told them that they owed Rs 2.5 million.” He ordered us to deposit Rs 1 million in his personal bank account as soon as possible,” said Kul Prasad Parajuli.
Singh handed a letter to the farmers, in which he asked them to pay the land tax and submit a recommendation letter from the ward office to repurchase the land. Sensing trouble, the farmers wanted to deposit the money in the cooperative’s account. But Singh said the cooperative’s accounts had been closed. They met Nabin Pun, the chairman of the cooperative, who lives in Pokhara. Pun is the son of Uttam Pun, a politician with the Rastriya Prajatantra Party. Uttam Pun had been responsible for trouble at the Nepal Cooperative and Nepal Development Bank.
Nabin, however, told the farmers to only pay Rs 1.5 million. This further confused them, but they had to save their farmland anyway. When they called Singh before depositing the money, he told them to wait until the cooperative’s board meets.
’Give us back our land’
The farmers waited for the board’s decision. Meanwhile, the cooperative issued a notice in a newspaper and auctioned their land. The cooperative sold the land to Khayar Bharani Enterprises, a company with sole ownership of Dr Prem Pun of Om Hospital, for Rs 1 million. The farmers only knew this deal when they returned with paperwork to transfer the land ownership in their names.
The farmers were able to stop the auctioning of their asset after they registered complaints at Pokhara Metropolitan City, Land Revenue Office, Kaski and District Administration Office, Kaski, but the cooperative filed a case at the High Court in Pokhara, seeking a stay order so that it could auction off the land.
On July 16, 2019, the High Court ordered the metropolitan city’s ward 23 ‘to coordinate and find a resolution between the petitioners and the defendant, as there was a possibility of a resolution of the issue.’
After the local officials failed to resolve the matter, on July 22, 2019, the farmers visited the Department of Cooperative in Kathmandu, where they demanded that their land be returned. But there was no response. They even sought support from Padma Aryal, the Minister for Land Management, Cooperatives and Poverty Alleviation, along with MPs from their area. In the third week of August, Minister Aryal held discussions with the cooperative, the Department of Cooperative and the farmers. The minister ordered the officials to return the land to the farmers, but her directive was ignored.
Kul Prasad Parajuli, a 56-year-old farmer, said, “We promised them to repay the loan and the interest and asked them to return our property, but they refused.”
Nepal Cooperative has been found to have committed two serious crimes while auctioning off the farmers’ land. Using the right to information, CIJ-Nepal has obtained the documents submitted by the Nepal Cooperative to the Department of Cooperative. The documents show the cooperative had been hiding the auction notice from the debtors even when they presented themselves at the cooperative. On February 10, 2019, a day before Rakesh Singh handed the letter to the farmers to pay Rs 2.5 million for the return of their land, the cooperative had published an auction notice in the Rajdhani daily newspaper.
By doing so, it violated the Cooperative Regulations 2018, which requires the lender to notify the debtors before auctioning their property. “To not share information with debtors when they were present at the cooperative is not only against the spirit of a cooperative, but also indicates an attempt to swallow up the property. People are losing their property because the recovery notices are issued by the lender without informing the debtors, who have no way of knowing it,” said Bishnu Prasad Timalsina, general secretary of the Forum for Protection of Consumer Rights.
The cooperative is also found to have forged the farmers’ signature to complete the auction process of the farmers’ properties. Parbati Adhikari, wife of Balaram Adhikari, does not know how to read and write, but Nepal Cooperative submitted her signature to the Department of Cooperative. Showing the letter, Adhikari said, “I don’t know how to sign a document.”
“After the farmers visited the cooperative to repay their loan, the officers illegally seized their property,” said Durga BK, a lawmaker from Kaski in the federal parliament.
When asked why the cooperative sold the farmers’ land, Nabin Pun said: “We summoned them to our office several times, but they didn’t come. So we sold the land to Dr Prem Pun for Rs 3 million.”
Shashi Kumar Lamsal, a deputy registrar for the Department of Cooperative, said, “We couldn’t help the farmers of Chapakot get their property back because the cooperative had already completed the auction process.”
Eye on prime property
Keshav Puri of Bhanimandal area of Lalitpur is another victim of Laliguras Cooperative. In early April 2010, Puri, in partnership with a friend, took a loan of Rs 19 million from Laliguras to buy a plot of 4 ropani and 7 ana land. He regularly paid the monthly installments for the first six months. When he could not pay, he planned to sell the land and pay off the debt.
Despite finding a buyer, the cooperative resisted his attempt to sell the land. Surendra Bhandari, the CEO of the cooperative, suggested that he put his 7 ropani land in Godavari as collateral for the same loan (Puri regrets the fact that he failed to ask how Bhandari knew about his property in Godavari).
Four years later, the cooperative auctioned off all of Puri’s 11 ropani. Puri learned about it from his friends six months later. When he enquired about it, the cooperative refused to provide the information. “When the cooperative valued the property, the price was Rs 650,000 per ana, but it was auctioned for 150,000 rupees per ana,” Puri said.
Devastated by the loss of property, Puri ran from pillar to post to file his complaint. He sought help of Keshav Badal, a lawmaker and the president of the National Cooperative Federation, the Commission for the Investigation of the Abuse of Authority, Nepal Rastra Bank and Central Investigation Bureau. He didn’t get justice. He also missed the deadline to file a case at the court.
“The cooperative captured my land, whose price was several times more than the amount I had borrowed from them,” Puri said.
Former judge Gauri Bahadur Karki, who headed a high-level investigation on troubled cooperatives in 2013, expressed concerns over the structural problem facing the sector. “Politicians have used cooperatives as a tool to collect money from people. They don’t want the sector to be regulated because that means they will not have a free hand on using people’s money,” he said.
CEO of the Cooperative Surenda Bhandari claimed that Puri’s statement is totally wrong. “Borrowers do not pay back loan and tend to complain of injustice after their properties are auctioned off legally,” added Puri.
From riches to rags
Not long ago, Ganesh Awale used to be a rich landlord of Baneshwar area in Kathmandu. The 74-year-old has lost almost all of his property because of real estate brokers who used his property to make profit.
In 2005, Awale had signed a contract with his tenant Narayan Karki to build an apartment in his property in Baneshwar. A year later, Karki said he needed loan to build the apartment. He persuaded Awale, who is illiterate to sign a document transferring the ownership of his property (four ropani 8 ana) to Karki. The property was transferred to Karki’s business partner Praveer Shamsher Rana.
Manoj Kumar Mishra (who was also a board member of Nepal Electricity Authority in 2013) bought the land from Praveer Shamser for Rs 2.3 million.
Mishra opened a company called Prama Developers Pvt Ltd and registered the land in the name of the company. The next day, he mortgaged the plot to borrow Rs 37.2 million loan from Kumari Bank. It is not clear why the money was borrowed. The ownership of the company (with such a large amount of debt) saw a series of transfers from Chandra Kumar Karki (Narayan Karki’s brother) to Santosh Khanal to Arun Lal Shrestha to Suresh Raj Ghimire. Ghimire sold some of his shares to Rameshwar Thapa. Then, both sold their shares to Nanda Kishore Basnet (currently Chairman of the Industrial Area Management Limited of the Ministry of Industry).
No one paid the loan. In July 2014, Kumari Bank issued recovery notice for the land. Awale finally found out that he had lost everything. There are 27 cases related to this in the court, including a case of property division in the family.
Various banks have issued loans worth Rs 2.25 billion against the controversial Lalita Niwas land as collateral. Similarly, four banks have issued loans worth around Rs 290 million against the land belonging to Awale. Clients are eligible to mortgage their land only 6 months after the purchase and it takes at least one week to process the loan application. However, in case of Awale’s land the loans were issued on the very next day of the purchase of the disputed land. And the loan amount was more than the price of the land. Moreover, it’s illegal to issue loan on the land whose owners are facing a court case.
On September 17, 2014, Ram Krishna Humagain of Kavre paid Rs 715 million for Awale’s land in an auction. He established a company called RKH Developers Pvt Ltd and registered the land in the company on October 13, 2014. The next day, Humagain took a loan of Rs 98 million (which is 37 percent more than the value of the land) from International Development Bank (NCC Bank after the merger). The head of the loan department at a commercial bank said on the condition of anonymity, “We are not allowed to issue loan amount exceeding the value of the property. It’s possible only through collusion.”
Humagain even influenced powerful government officials to evict the Awale family from the land. Humagain sold the land to Kalu Gurung, chairman of Roadshow Real Estate Pvt Ltd, a real estate company. Gurung bought the company (along with its land property) for Rs 200 million (Rs 4 million in cash and the rest in credit). The next day, he mortgaged the land and took a Rs 138.7 million loan to develop plots in the land from the Nepal Bangladesh Bank in Bijulibazar. After getting partial release for 7 ana of the land, Gurung sold it to two buyers. Prabhu Bank, Anamnagar issued a loan of Rs 12.3 million on the land. The officials of Nepal Bangladesh Bank didn’t reply to questions on why the bank issued loan against a disputed land.
Mukunda Kumar Chhetri, the head of the Supervision Department at Nepal Rastra Bank, said, “Banks cannot issue loan against a disputed land. If the debtor fails to repay the loan, how is it possible to auction it off?” Chhetri added, “If loan has been issued several times, but it hasn’t been utilized, then it can be a case of money laundering. We will look into the matter.”
Awale now lives with his grandchildren at his dilapidated house at the edge of the plot. “I retired with a pension after serving at Minbhawan Campus. I had signed the contract with the builders so that I could build a nice house,” he said. “They turned out to be fraudsters. Where shall we go now?”
Note: 1 ropani is equal to 508.73 square meters or 0.125 acre. Rs 114 is equal to a US dollar
Pangeni is Bertha Fellow. This report is prepared by the Centre for Investigative Journalism, Nepal in support of Bertha Foundation.