According to senior CBI officials who did not want to be identified, the scam began in 2008 and it amounted to “misappropriation of funds, criminal breach of trust and violation of FEMA (Foreign Exchange Management Act) guidelines".
“The case was registered late on Sunday night, upon a complaint by the Bank of Baroda (BoB) against Rotomac Global Pvt. Ltd, and its directors Vikram Kothari, Sadhana Kothari and Rahul Kothari," said a senior CBI official, requesting anonymity.
On Monday, the agency conducted searches across three places in Kanpur and questioned all three accused directors. The agency also sealed residential premises belonging to Vikram Kothari as well as an office of Rotomac directors in New Delhi.
The agency stated in the FIR that Rotomac had cheated a consortium of seven banks by siphoning off bank loans of Rs2,919 crore. Including interest, the amount comes to Rs3,695 crore.
Of this, the CBI FIR revealed, Rotomac owed Rs754.77 crore to Bank of India, Rs456.63 crore to Bank of Baroda, Rs771.07 crore to Indian Overseas Bank, Rs458.95 crore to United Bank of India (UBI), Rs330.68 crore to Allahabad Bank, Rs49.82 crore to Bank of Maharashtra, and Rs97.47 crore to the Oriental Bank of Commerce (OBC).
Calls and emails to the Rotomac Group office in Kanpur seeking a response were not answered.
The agency FIR added that Rotomac had diverted the sanctioned loans to another “fake company", from where the money was routed back to Rotomac.
“The money was utilized for purposes other than executing export orders—credit sanctioned from the export order received from Singapore for supply of wheat was diverted to another company called Bargadia Brothers Pvt. Ltd (Singapore). Later, the money was remitted to Rotomac’s account by Bargadia. In other cases, the money disbursed for procurement of goods for export was not utilized for this purpose and no export order was executed by the company," the CBI official added.
While most of Rotomac’s transactions were with a limited number of buyers, sellers, sister concerns or subsidiaries of the company, the CBI in the FIR stated that “it was alleged that the company was working for interest rate differential in local and foreign currencies and no genuine business transactions were being carried out."
The company’s account was declared non-performing in October 2015 after it defaulted on loan repayments. Following this, banks led by consortium leader Bank of India arranged a forensic audit and the report highlighted certain irregularities on the part of the company, said two bankers on the condition of anonymity.
Later, Bank of Baroda (BoB) initiated an internal investigation to check for fraud. After detecting fraudulent activity, the bank reported it to the Reserve Bank of India (RBI) in December 2017 and lodged a first information report with the CBI on Saturday. BoB had declared the promoters as wilful defaulters in July 2017, according to people aware of the development.
Meanwhile, banks are trying to recover dues by selling properties under SARFAESI, (The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act), and filing suits at debt recovery tribunals. BoB also filed an insolvency petition against the company and the case was admitted by the National Company Law Tribunal (NCLT) in October, 2017, said the two unnamed bankers cited above.
“This was a classic case of a promoter’s inability to repay loans. The reason cited by the company was cash flow mismatch because of a delay in realization, pertaining to overseas transactions. All the limits were sanctioned based on the financial information that was furnished by the promoter while availing loans," said an official with a Mumbai-based bank, requesting anonymity.
Since the account has been an NPA for over two years and there was fraud and reference to NCLT, most banks have made 100% provisioning against the account. Bank of Baroda and Bank of India have made full provision against its exposure, according to three people in the know, who did not wish to be identified.