In executing the Rs 3,700-crore loan fraud, the promoters and directors of Rotomac Global Private limited kept the lenders in the dark by submitting the fake documents in the name of fictitious companies in connection with merchant trading.
The revelation is part of the complaint Bank of Baroda (BoB) has made to the CBI. The BoB has pointed out that Rotomac group never produced details of trades that it carried out under mercantile trade segment. The agency also alleged that Rotomac had submitted only photo copy of the bills of the merchant transactions to the bank.
Interestingly, the bank, in a filing to stock exchanges, said the account of Rotomac Global was declared a non-performing asset (NPA) or bad loan by it on October 3, 2015 and it made 100 per cent provisioning for the loan.
The CBI teams on Tuesday continued their searches for the second day at the Kanpur-based house and premises of Rotomac owner Vikram Kothari. The mobile phones of all members of the Kothari family and his staff and domestic helps have been confiscated. In a related development, the Income Tax Department has attached 11 bank accounts of Rotomac and Kothari in connection with an alleged tax evasion probe.
Kothari took public sector banks for a ride between 2008 and 2013 by getting foreign letters of credit (FlCs) for making payments to his buyers and suppliers who operated from virtual offices in places like Dubai, Sharjah and Hong Kong.
The Rotomac Global Pvt ltd, engaged in intermediary trade and manufacturing pens, routinely approached seven banks, including BoB’s international business branch at the Mall, Kanpur, seeking credit ranging from Rs 15 crore to Rs 200 crore from 2008 to 2013, mostly for exports and imports. The Bank of Baroda alone was cheated of Rs 456 crore by Kothari.
“The company has misutilised the facility and submitted the documents related to mercantile trade on the basis of which chain of the transaction could not be established. The representative from Hongkong Branch visited the address given by the company for M/S Gulf Distribution ltd and found that the company is maintaining a virtual office and there was no office present on the address,” the Bank of Baroda stated in the compliant.
Citing an example of the fraud, the CBI FIR said: “Credit sanctioned for export order received from M/S Starcom Resources, Singapore, for supply of 15,700 MT of wheat was diverted to another company M/S Bargadia Brothers Pvt ltd Singapore. later the money was remitted to Rotomac,” the FIR said.
It added: “…In other cases money disbursed for procurement of goods for export was not utilised for this purpose and no export order was executed by the company. Money remitted to suppliers for procurement of goods for export disbursed through Packing Credit Account was settled from remittances received from third parties, not related to export transactions.
“The company was working for interest rate differential in local and foreign currency in addition of Merchanting trade. There was no genuine business transactions carried out by the company. The entire business operation was carried out through fictitious and front companies. The company submitted false and forged document and thereby dishonestly induced bank to advance money and thereby cheated bank and fraudulently siphoned off funds causing financial loss to the bank and wrongful gain to itself to the tune of Rs. 456 crore which is still outstanding and to be recovered from the company, its directors guarantors ie accused persons,” the CBI alleged.
On the other hand, the IT Department has attached 11 bank accounts in connection with an alleged tax evasion probe against them. “The accounts in various bank branches in Uttar Pradesh were attached on Monday night. The provisional attachment action has been carried out to “recover outstanding tax demands” understood to be about Rs 85 crore,” the tax officials said. Three bank accounts of the group were attached in January last year by the department.
The Kanpur-based group is being probed by the CBI and the ED in connection with an alleged bank loan fraud of Rs 3,695 crore, given by a consortium of seven banks.