As reports of banks flouting guidelines to aid interests of promoters and commercial entities continue to pour in, another case emerged on Thursday as CBI registered a case against Vadodara-based M/s Diamond Power Infrastructure ltd (DPIl). Its founder Suresh Narain Bhatnagar and his two sons — Amit Bhatnagar and Sumit Bhatnagar — have allegedly defrauded a consortium of 11 banks led by Axis Bank to the tune of Rs 2,654.40 crore.
According to latest reports, the CBI has started conducting searches at its corporate office, two factory premises and three residences of its founder, managing director and joint managing director. DPIl is engaged in the production of cables and other electrical equipment.
CBI sources further said the fraud couldn’t have happened without the connivance of bank officials, who are under scanner.
Notably, loans were given despite this entity being blacklisted by the Reserve Bank of India (RBI). It is alleged that M/s DPIl, through its management, has fraudulently availed credit facilities from a consortium of 11 banks since 2008. The company and its directors managed to get the term loans and credit facilities, in spite of the fact that they were already appearing in the RBI’s defaulters list and Export Credit Guarantee Corporation caution list at the time of initial sanction of credit limits by the consortium. At the time of formation of Consortium in 2008, Axis Bank was the lead bank for the term loan and Bank of India was the lead bank for CC limits. The banks include Bank of India, Bank of Baroda, ICICI Bank, Allahabad Bank, Axis Bank, Dena Bank, SBI, IOB, IFCI, EXIM bank of India , Corporation Bank and other financial institutions.
The CBI has charged DPIl and its directors with fraudulently availing loans from 11 banks, thus amassing a debt of Rs 2,654 crore as on June 29, 2016.
The account DPIl in Bank of India and Bank of Baroda were declared NPA on February 16, 2016 (w.e.f. 9.1.2015) by the RBI based on Asset Quality Report conducted by it. The accounts of the company with other banks were declared NPA from December, 2017.
The company, allegedly with support of officials from various banks, managed to obtain enhancement in credit facilities. During the year 2011, DPIl had projected turnover of Rs 2,197.60 crore for the year 2012 whereas the actual turnover was Rs 1,267.60 crore only for the year 2011. DPIl got credit facilities enhanced from Rs 285 crore to Rs 480 crore. In the next year, against the estimates of Rs 2,197.60 crore, DPIl actually achieved a turnover of Rs 1,740.38 crore as on March 31, 2012, which was less by Rs. 457.22 crore from the projected turnover figure, despite the fact that the CC limit was fully availed by the company. Bank of India officials, while conducting the credit review, did not decrease the cash credit limit, and kept it unchanged at Rs 480 crore even though such figures were based on grossly exaggerated sales figures.
“DPIl was submitting false stock statements to the lead Bank by treating the receivables more than 180 days (Non-Current Asset) to less than 180 days (Current Asset) to get more drawing power in their Cash Credit Accounts. The receivables were also dated from the date of payment instead of the date of invoice, as are required by the banking guidelines. In this manner, DPIl had fraudulently shown higher net working capital indicating their cushion to take up higher working capital exposure,” the CBI FIR said.
“The company had extensively utilised the Cash Credit limits for obtaining large number of letter of Credits and many of which could not be honoured by the company and were thus forced charged on the credit limit. It is learnt that since 2008, about 1,000 such lCs issued by Bank of India alone devolved, which included at least 16 lCs amounting to Rs 110.79 crore issued in the name of M/s. Ruby Cables (Sister Concern of M/s DPIl). These lCs in favour of sister concerns were issued by bank officials in gross violation of bank’s guidelines in order to give undue pecuniary favour to the borrowers,”the FIR read.
The account of company started becoming overdue in 2014 and this was first reported lOB, Exim Bank and State Bank of Hyderabad on December 1, 2014.
DPIl is now under pending its takeover by the CKP group. lenders hold 70% stake in the company after converting their debt into equity under the strategic debt restructuring scheme.