The Travancore National and Quilon Bank debacle

The crash of the Travancore National and Quilon bank and the involvement of Sir CP in the affair is known to many old-timers. Those who had thrown their lot with the Matthen’s and Mammen’s side of the story laid the blame squarely on Sir CP, opining that it was his vendetta against the Christian lobby. CP’s supporters, on the other hand, blamed Matthen, the Christian lobby, and the bank’s erroneous ways. Left leaners made it clear that it was all to do with TNQB’s support for the up-and-coming State congress and the demands for responsible government, plus the implementation of democratic reforms in Travancore. A veritable mess indeed!

Studying this episode was not, as I had imagined, a dour and dry effort, it was full of drama, emotion, and large doses of intrigue. Set in the late 1930’s time frame, it featured an incredible array of characters like the Junior and Senior Ranis of Travancore, Sir CP Ramaswamy Ayyar, VK Krishna Menon, MA Jinnah, MO Mathai, Chithira Tirunal Balarama Varma, CP Matthen, Mammen Mappila, Eliamma Matthen, etc. just to name a few. The principal character was Sir CP, who I must admit did do a lot of good for Travancore, but then again, his larger-than-life ego and personality, combined with his rapport with The Junior Rani also ended up fouling the Travancore air, along the way.

Let’s take a look at the chronological timeline of events.  Mammen Mappila started the Travancore National bank in 1912, and CP Matthen started his Quilon bank in 1919. After a couple of decades of healthy competition, the two banks decided to join hands in 1937, the first merger since the start of the RBI. Sir CP, who became the Dewan of Travancore in 1936, inaugurated the amalgamated Travancore National and Quilon bank, in June 1937. Upon the Dewan's insistence, the bank which had extensive operations across India, was registered in Travancore. For reasons we will get into later, a run started at the bank’s branches in April 1938, with creditors rushing to its doors to withdraw their deposits. The RBI declined to support and ordered an investigation, while the state sircar (i.e., Maharaja’s government) refused to infuse funds to prop up the failing enterprise. They felt that the bank was diverting funds to finance a state congress movement hell-bent on ruining the Monarchy. Unable to stop the run, drowning in a liquidity crisis and with TNQB’s liabilities greater than its assets, the writing was on the wall. By July 1938, TNQB had for all practical purposes folded up, and winding up operations were underway. The bank’s directors were then extradited from Madras to Trivandrum in April 1939 and held at the Central jail after their attempts and a plea to stay the effort in court failed. Mammen’s sick brother KC Eapen died in confinement, and some months later, Mammen and KM Eapen, were pardoned and released. However, CP Matthen, who continued to resist was released only in Feb 1942, after the British intervened.

Though the bank went defunct by 1939, and was eventually wound up only in 1955 due to various legal complications, the repercussions in Travancore in the interim, were heavy, with the public quickly up in arms against the tyrannical ‘foreigner’ Dewan. Major events cascaded, the second world war intervened, India became Independent, Sir CP left Travancore after a murder attempt, and the Travancore royals acceded to the Indian union after a period of hesitation, no longer the princely state it was. But during those 2-3 years when the bank floundered and newspapers such as the Malayala Manorama were shuttered, there was high drama and intrigue, some of it confined under wraps, with only rumors swirling around.

The most difficult part was to understand how the animosity between the royal house and CP Matthen, a precursor to all of this, came about. What we can affirm is that the Maharani Sethu Lakshmi who assumed the reins of the state as its regent in 1924, had supported the Christian minority, among the many other important reforms she instituted, much to the displeasure of the Junior Maharani Sethu Parvathi, mother of the Raja in waiting, Chithira Tirunal. It was perhaps the appointment of ME Watts as the first Christian Dewan by Sethu Lakshmi, which raised the ire of the Travancore Nairs, the Junior Rani, and the heir prince.

There are a few other pointers as well – There are indications that Sir CP as a lawyer had previously argued a case supporting the Mammen faction against the Matthen faction, but I have not been able to collect details on it, save a recent mention by Adv Jayashankar in a video clip. Now, this could be related to the various Christian Sabhas and factions (and their squabbles) in Travancore, best studied separately. There is another significant incident from 1937 where a Christian missionary, named Emily Kinnaird tried to bamboozle CP into arranging an alliance between the daughter of one Govindan Kaimal with the young maharaja, which Sir CP refused to get involved with. Emily tried to escalate this to the upper echelons of the British bureaucracy, something Sir CP took an affront to. The Maharani and CP were seemingly furious about these missionaries trying to poke their noses into the workings of the staid Travancore monarchy. Finally, we have the state congress and representation issues which many researchers have studied and presented in many works.

During those periods, the state was run as a Hindu state and in 1932, when the prince became the Maharaja, Sethu Lakshmi was sidelined by the Junior Rani, and Sir CP became her constitutional advisor. The Syrian Catholic community which then had double the population compared to the Nairs was aggrieved that they had a much smaller representation in the legislature compared to the Nairs. The Christians protested, but nothing came out of it and thus started the ‘abstention movement’ which became a great affront to the Rani, Sir CP, and the Raja. Sir CP equated this protest to a non-cooperation movement and termed it a dissent.

I will get into the story of the original Quilon bank, the Americans, and the Cashew business in a separate article, but Matthen, an industrialist, decided to branch into new ventures. We can see that his forays into the ceramics industry and the titanium venture were scuttled, with fingers pointing to Sir CP’s interference. Overall, the situation in Travancore in the ’30s was turbulent, with numerous agitations disturbing the peace.

Around that time, CP sent feelers to Matthen to find a way to reduce the political tension, and accordingly, they met in Nov 1933. During the meeting, CP asked Matthen not to involve the British paramount powers in these matters and stated that the Maharaja was willing to discuss the situation directly with the leaders of the abstention movement. Matthen agreed to be an intermediary and after discussing the issue with the leaders, met CP again together with EJ Phillipose. During the latter meeting, CP is said to have confirmed that equal representation would be provided for the Christians in the legislature in due course, but insisted that their movement had to be withdrawn and that the British should not be involved. The statement of withdrawal had to be submitted by the leaders in the form of a letter without preconditions, before the expected arrival of the Viceroy in Travancore.

The letter was submitted in good faith, but the reply from the Maharaja contained no reference to any redress or revised representation for the other castes or the Christians. Matthen protested and CP asked him and Phillipose to wait for the new Dewan Habibullah to review the matter and make a formal decision, but nothing came out of it, and so they submitted a formal memorandum to the Dewan outlining the aspects above. Sir CP responded stating that nothing, as stated by Matthen, had been agreed to and that the contents of the memorial were false and misleading. A furious Matthen issued a public statement outlining the situation, and with that, all hell broke loose! The swords had been crossed and an unequal battle was looming ahead.

Somewhere along the way rumors surfaced of Matthen stating that Travancore needed only one CP (Matthen’s initials) and Sir CP countering that one CP (Sir CP himself) would suffice. Actually, there was one more CP in the game, the British resident Sir CP Skrine!

The next issue highlighted was related to the involvement of the Quilon bank with the State Congress party and the apparent control of the congress by the Christian lobby. The Quilon bank had by 1936, obtained formal recognition as a scheduled bank and Matthen had been informed by Sir Osborne, the Reserve Bank Governor while on a trip to Delhi, that CP had been spreading the word around about the Quilon bank financing the State Congress and fomenting an agitation against the Travancore establishment. Around the same time, Sir CP accepted the post as Dewan of Travancore and arrived at Trivandrum. Invited for a reconciliatory meeting, CP apologized to Matthen for his remarks to Osborne and agreed to bury the hatchet with him.

On the business front, Matthen and Mammen Mappila decided to form a joint venture, that being the Guardian of India insurance Company, and this was the percussor to the decision to join forces in the field of banking as well. Accordingly, the Travancore National bank run by Mammen and the Quilon bank decided to merge in 1937. The merged unit, the TNQB bank ranked third in business volume in India, behind the Central bank and the Bank of India, with 60 of its 80 branches outside Travancore. Sir CP convinced the directors to register it in Travancore instead of Madras as had been originally planned and offered all the help from the state.

CP, failing to stop the TNQB merger, seemingly worked behind the scenes to support Imperial bank, its competitor, preferred by the royal establishment. Avid Travancore historians may recall KS Ramanujam, the GM of the TNQB bank, was an ex-Imperial bank officer, and rumored to be Sir CP’s spy in the TNQB bank, the very same person who became an informer and later vanished from the scene.

The TNQB team completed the construction of the bank headquarters at Quilon, and Sir CP inaugurated the Quilon head office with a grand speech, in June 1937, subtly warning the bank, to stay honest in its activities. The reason for CP’s comment was based on the activities of certain officers who were engaged in tirades against CP, and also loans that had been advanced to certain directors and their relatives, without appropriate security. From an ethical and audit perspective, this was inappropriate on TNQB’s part. Nevertheless, formal banking rules had not yet been instituted, private money lenders and chit funds ruled the roost, and all this was not, strictly speaking, illegal.

Starting with a vicious rumor campaign (by word of mouth and pamphlets) decrying the activities of the bank, things quickly went south for TNQB, resulting in a run on the bank and a rush by people to withdraw all deposits (April 1938). Falsehoods such as the prospective withdrawal of a 75 lakhs deposit by the state (when no such deposit existed) added fuel to the fire. Three of the key directors (Karayaler, Narayana Pillai, and Khaderbhoy) quickly resigned, pressured by CP. Based on the advice from Madras chief minister C Rajagoapalchari, Mammen met CP to patch up. Sir CP admitted that he had coerced the directors to resign and made it clear that his enmity was with Matthen and that the bank should not only severe all connections with the State Congress which were becoming a huge nuisance, but also to ensure via Matthen that three of its members TM Varghese, KT Thomas and EJ Phillippose, severe their congress connections. Simultaneously the Police commissioner (CP claimed ignorance of this) sent out a circular stating that Matthen and a few others be placed on a watch list and the public be informed not to conduct any dealings with the TNQB bank! Another conflict hovering in the background is related to the similarity between the emblem or logo of the bank with the state logo. The TNQB bank refused to change its emblem when asked to do so by the sircar.

Two other aspects merit some study. The first is related to tax evasion by both the TNB and the Quilon banks, so noticed by Sir CP. He explained to the Raja that with this information, they could crush the bank whenever they wanted, proving that there had been a plan from the outset to do just that. He added that he intends to bring about the bank’s collapse and destroy the careers of Mammen and Matthen in a year, armed with all this destructive information, while at the same time mentioning that the Imperial bank was unhappy, that the TNQB amalgamation had taken place. 

The reader might wonder if it was all the work of Sir CP. From Sreedhara Menon’s crisp study of the episode, it becomes quite clear that Sir CP was executing palace orders. He clarifies also that while this was clear to everybody, they also knew that attacks had to be directed to Sir CP personally since anything said against the palace would have been seditious and could have resulted in strict legal action.

Meanwhile, Matthen had moved to Madras, perhaps fearing renewed opposition from Sir CP. On the Tax front, after the TNQB amalgamation came into effect in Sept 1937, they paid larger taxes as assessed. But Sir CP’s machinations continued. Key depositors (90% of its depositors were from outside Travancore) like the Maharaja of Mysore and financier Ramanathan Chettiar (Annamalai Chettiar’s son) representing the industrial giant, Siemens, withdrew their deposits in the bank.

On the political front, the state congress decided to submit a memorandum to the Maharaja, complaining about the Dewan, his highhanded actions, his acts of nepotism and favoritism. Mammen and Matthen, fearing a crash of their bank, intimated Sir CP and the British resident Skrine of this Congress memorandum as early as May 1938. They added that the memorandum could be halted if the sircar helped the bank, thus linking the two issues but lending weight to CP’s accusation that Congress was controlled by Matthen and the Christians. Sir CP and the palace refused, the memorandum was printed in the neighboring Cochin state, at the cost of the TNQB bank, and was circulated in July 1938. Meanwhile, the run continued, and the bank was in the doldrums.

The TNQB was doomed, it was just a matter of time, desperate measures were needed and the bank’s directors, now cowed, were ready to grovel if needed. Matthen and Mammen decided to leave the bank entirely and requested two of their European friends WT Andersson (a TNQB director) and F James (a Tata director) to intercede on their behalf and get Sir CP to accept a new board. Sir CP, agreed to this in a face-to-face meeting according to Matthen, but later sent out a letter stating that it was all falsehood and that he had agreed to nothing!

The run peaked and over a crore and 25 lakh rupees had to be paid to creditors. The bank was teetering. The Reserve bank had already been notified, with the directors asking for a credit to tide over the situation. The RBI Governor James Taylor flatly refused any help. This phase is presented in detail by CP’s biographer Saroja. A year had passed since the inauguration and the world was at war. The British had no intention of antagonizing any native prince at this stage, so the TNQB bank, was, therefore, on its own. With no form of redress or support, the bank shuttered its doors and went into liquidation. The first thing CP did was ensure that the bank’s emblem was changed, as the bank went into liquidation.

The TNQB directors and their families fled Travancore to Madras, and Mammen Mappilai’s flagship newspaper Manorama had been shuttered, on CP’s orders. Sir CP, colluding with Skrine the resident, had an extradition (to Trivandrum) order served to them. On 20^th Oct 1938, Matthen and Mammen were arrested in Madras and waiting to be transported to Trivandrum. The defendants appealed to the Privy council in Britain with the help of VK Krishna Menon. The appeal however failed on a technicality, since only one judge i.e., Panduranga Row at the Madras high court had issued a writ of habeas corpus, and not two as strictly demanded by section 491.

But the British government on the whole appeared to be more inclined towards the bank’s directors, and rumors now swirled that Sir CP may be asked to resign, but then it also became apparent (Skrine’s memoirs) that the Maharaja would insist on such an order being served by the Viceroy and, if served, the Maharaja would abdicate. It was not a situation that the British wanted, in the middle of the war efforts.

Eventually, after the loss of their final appeal, the group (Matthen, Mammen, KM Eapen, KV Varghese) was transported to Trivandrum and lodged at the Poojapura Jail in April 1939. KC Eapen, Mammen’s brother, another bank director, who had been asthmatic, surrendered and was jailed, but died in prison, some days later. Just after their incarceration, EJ Philippose arrived as an emissary from CP, meeting Mammen and his son Eapen and suggesting that if they admitted their guilt, their sentence would be converted to simple imprisonment, and if they appealed to the Maharaja, they would be pardoned. They refused and the perfunctory trial started. The charges against them were falsification of balance sheets and conspiracy to defraud. Any or all questions touching on the Dewan’s involvement were disallowed in the court, risking contempt, and eventually, Matthen’s lawyer Basu from Calcutta (no local would represent him) had to withdraw from the case altogether.

After a two-month trial, all the accused were sentenced to 8 years of rigorous imprisonment. On a later appeal, KV Vargheese was let off. KS Ramanujam, the General Manager, turned a court approver and was pardoned. Mammen and his son Eapen were pardoned after some months, once they admitted responsibility for the bank debacle, and were released in Sept 1941. Matthen, who refused, continued to be incarcerated due to his “defiant and contumacious attitude’.

It was at this juncture that the anguished Eliamma Matthen spearheaded the efforts to get Matthen out of jail. KP Abraham helped draft an appeal in July 1941, adding the opinion of BL Mitter- the advocate general in her support. Armed with Mitter’s opinion that the process appeared somewhat illegal, she appealed to the Viceroy. The appeal worked its way through the political department and the legal department which opined that the sentence doled out though not barbarous, was excessive (since the sentences were to be consecutive) and that the process and sentence were as such, faulty. Based on this, the resident was informed to contact the Dewan and sort out the matter. Now you can see the reason why Sir CP, a keen lawyer himself had been trying all along to get the three prisoners to confess so that he could preempt any British pressure.

The new Police commissioner Abdul Karim (the chap who became CP’s envoy to Pakistan, later) visited Matthen to persuade him and obtain the confession which CP desired, but Matthen held firm. He then tried to get Matthen to at least confirm that he would not finance the state congress, but Matthen held fast. Finally, CP Matthen was released on 22^nd Jan 1942.

Without a doubt, it is quite clear from the banking regulators and auditor’s points of view, that there were serious financial irregularities at the TNQB, meriting citations and penalties, and it is also apparent that TNQB’s finances and books were in a bad shape, before it collapsed. The bank’s performance, beset with many irregularities, did not support its case, and all this was not just CP’s doing, as some feel. It also becomes clear that the discussions between TNQB and the RBI did not reach anywhere, mainly due to hesitation from TNQB’s part in allowing complete audits of their accounts and premises. CP’s biographer does not fail to mention – The TNQB’s mission to the RBI for aid was doomed to failure because the RBI governor would never dare to antagonize CP, once his superior officer in the Viceroy’s council. Then again, the General Manager Ramanaujam, responsible for the day-to-day activities (and the fudging of books plus its mismanagement), vanished the scene scot-free. But CP’s act of allowing the bank to fail by not lending it much-needed support, because potential losers were out of state while at the same time, bringing his detractors to justice under the rule of law in Travancore, seems quite inappropriate.

Once thing is clear, CP remained loyal to his principals, for he never blamed the Junior Rani or the Raja during the entire affair, and focused only on their personal interests, more so compared to his public responsibilities as a Dewan. While it becomes apparent that there was considerable personal animosity in Sethu Pavathi’s heart against Matthen, the underlying reason is something I could not unearth.

Many a luminary got involved in this case. As we saw already, VK Krishna Menon was involved. We can also see MA Jinnah representing MA Gopalakrishnan for a portion of the liquidated effects. Bhulabhai Desai, Bashyam Iyengar, and many others, including Calicut’s KG Nair featured at various junctures. MO Mathai (Nehru’s PS) seems to have been involved as a stenographer for Matthen and in assisting some British lawyers, for the defense. The complete story as you can imagine, will span many score pages.

In the end, most creditors got back a good portion of their deposits while at the same time some of CP’s cronies enriched themselves during the bank’s liquidation. Matthen went into politics and represented the Lok Sabha in 1952, later becoming the Indian ambassador to Sudan in 1957. He retired in 1958 due to ill health and passed away in 1960, aged 70. Mammen and his family flourished with their newspaper and other ventures. Sir CP moved back to Madras after India’s independence.

Footnote – On July 24^th, 2017, the late Mr. S Muthiah, writing in the Hindu, mentions a meeting with Marian Ram, the granddaughter of Matthen and wife of N Ram (Hindu), when he became aware of Eliamma’s diaries. This prompted him to write the article ‘Diaries that record History’. He concluded thus - In his biography of Sir CP, A Raghu, however, takes another view of the TNQB affair. The tragedy seems to me deserving of greater objective research, preferably by a banker or economist with no religious bias, to tell the true story that, according to Raghu, is worthy of “a Hollywood thriller”. I am neither a banker nor an economist, but this is my feeble attempt at retelling this saga as I read it, and well, I won’t be surprised at all, if I have missed some facts, twists, and turns along the way. If so, readers are welcome to contribute through comments. If I have erred, my apologies, please correct me. Thanks to Sharat and Manu for patiently answering some of my questions and providing me some important pointers.

Pics - Wikimedia, KC Mammen Mappilai - Keralaculture.org