New Delhi/Mumbai: ICICI Bank Ltd has moved a US court against 11 executives of Mumbai-based diamond company Shrenuj and Co. for allegedly defrauding the bank, and has sought to recover over $12 million (around 88.50 crore) from them, besides interest and legal fees.

The bank’s petition filed on 4 October said Mumbai-based Shrenuj, which is currently undergoing insolvency resolution, diverted funds through its US subsidiary Simon & Golub & Sons (SG), and shell companies in the UAE.

ICICI Bank, through its New York branch, filed the case in Southern District Court of New York, under the Racketeer Influenced and Corrupt Organization (RICO) Act against promoter Vishal Doshi and 10 other executives from Shrenuj and other companies with which it had related party transactions.

“The defendants (11 executives), acting in concert as co-conspirators, engaged in repeated RICO violations in a pattern of racketeering and fraudulent activities spanning the globe from India to the US to the UAE," said the bank in its petition filed through its law firm Sabharwal & Finkel Llc.

ICICI Bank claims that this was done using Shrenuj, SG and UAE shell companies as “instrumentalities of their fraud, inducing Plaintiff (ICICI Bank, NY Branch) to extend and maintain loan facilities to SG, then diverting such loan proceeds to themselves through Shrenuj and the UAE Shell Companies by means of a series of fraudulent transactions, spanning a time period from 2 July 2008 through 31 March 2016."

Mint has reviewed a copy of the complaint filed by ICICI Bank.

According to the petition, Shrenuj’s US subsidiary SG had entered into a credit facility agreement in 2008 for $20 million. As of March 2016, SG owed $18.8 million to ICICI Bank. Out of this, $3.6 million was in the form of a letter of credit and $15.2 million under the revolving credit facilities. According to ICICI Bank, a financial statement provided by SG in May 2016 showed it was not in a position to repay these obligations.

A letter of credit is a financial instrument issued by a bank to another bank (especially one in a different country) to serve as a guarantee for payments made to a specified person under specified conditions.

Subsequently, ICICI Bank had approached the court in Seattle to appoint a receiver for SG. During the course of receivership proceedings, the receiver discovered alleged fraud and fraudulent transactions by SG to certain third parties.

“The New York Branch of ICICI Bank Ltd has commenced a lawsuit in the courts of the State of New York in relation to the collection of an unpaid loan," said an ICICI Bank spokesperson in an email response. “The bank cannot comment on the ongoing litigation except to confirm that the case does not include any allegations of wrongdoing against any of its employees," he added.

“We have not received any intimation from any source about this case and in the absence of details of the case, we are not in a position to furnish any response to you," a Shrenuj & Co. spokesperson said in an email response. “In future, as and when we receive any details of the allegations, we shall defend the case suitably in court. We also wish to add that ICICI Bank and Shrenuj are engaged in multiple litigations which are subjudice," she added.

In August, Bank of India moved NCLT’s Mumbai bench to begin insolvency proceedings against Shrenuj for defaulting on a 226 crore loan. The firm owes a total of 1,113 crore to a consortium of 17 lenders.

“To tackle misuse of the legal person or complex corporate structure is on high-priority agenda of every government. In India, the task force on shell companies was set up by the Prime Minister’s Office (PMO) under the joint chairmanship of the revenue secretary and MCA secretary to check the menace of companies indulging in fraudulent illegal activities including facilitation of tax evasion," said Paras Savla, a partner at audit and consulting firm KPB and Associates.

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