The Pen is mightier than the fraud.

The sprawling 4,000 square yard ‘Santushti’ mansion in the plush Tilaknagar locality in Kanpur wears a forlorn look but for the occasional comings and goings of vehicles belonging to the Central Bureau of Investigation (CBI) sleuths. And each time the gates open, revealing a bevvy of luxury vehicles, anxious camera persons and reporters, camping outside Vikram Kothari’s palatial residence, jump into action hoping to catch the ongoing probe against the tycoon, embroiled in one of the biggest loan default cases. ‘Rotomac’ had its glorious run and emerged a top player in the writing instruments market. As time went by, Rotomac Pens Private Limited was rechristened to Rotomac Global Private Limited while Vikram Kothari moved into sectors like real estate, steel and infrastructure, hoping to replicate his success.Related image

Rotomac Global Pvt Ltd, engaged in intermediary trade and manufacturing pens, routinely approached seven banks, including Bank of Baroda’s (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. Bank of Baroda, the complainant alone was cheated of approximately Rs 456 crore by Kothari. Instead of using the money to pay buyers/suppliers, the money was round-tripped to accounts of Rotomac and its sister companies. For example, Rs 15.50 crore in packing credit disbursed to Rotomac’s current account for executing an export order of $4.2 million was remitted to the company’s other accounts through RTGS.

Similarly, BoB gave packing credit of around Rs 34 crore for an export order received from Starcom Resources PTE Singapore for supply of 15,700 tonnes of wheat. This money was remitted to the account of Bargadia Brothers Pvt Ltd. The CBI FIR claimed that Rotomac received around Rs 16 crore from Bargadia immediately after this. “It clearly shows that no export was made and the packing credit sanctioned was misutilised,” BoB said in its complaint to the CBI.

 

Modus Operandi

 

According to sources, the credit was sanctioned and the loan disbursed to Kothari for importing wheat from a company in Singapore, but the amount was not utilised for the purpose. Instead, it was diverted to another company and the money was later remitted to Rotomac. “Money was sought from the banks for importing wheat from a Singapore-based company, Bargadia Brothers. But when it was sanctioned, the money was not utilised to buy wheat. The money first went to Bargadia brothers and then came back to Rotomac. No export order was ever executed. This round-tripping of money amounts to misappropriation of funds, criminal breach of trust, and violation of FEMA guidelines,” an official said. He added: “Most of the transactions of the company are with limited number of buyers, sellers, sister companies, and subsidiaries of Rotomac.” According to sources, the company was betting on the foreign exchange rate. The company was working for ‘interest rate differential’ in local and foreign currency. In reality, no genuine business transaction was being carried out.

 

The First Information Report (FIR) copy says the following:

Seven banks acted as the consortium. These include: Bank of India, the consortium leader (Rs 754.77 crore); Bank of Baroda, the complainant (Rs 456.63 crore); Indian Overseas Bank (Rs 771.07 crore); Union Bank of India (Rs 458.95 crore); Allahabad Bank (Rs 330.68 crore); Bank of Maharashtra (Rs 49.82 crore); Oriental Bank of Commerce (Rs 97.47 crore).

Kothari is currently under arrest. This is the second major financial scam to break out after the sensational Rs 114 billion (Rs 11,400 crore) fraud allegedly committed by billionaire jewellery designer Nirav Modi and his uncle Mehul Choksi, who is a promoter of Gitanjali group of companies. Both fled the country before the Punjab National Bank realised the depth of the alleged crime. PNB allegedly issued 143 letters of undertaking (LOUs) and 225 Foreign Letters of Credit, amounting to Rs 4,886.72 crore to three of Choksi’s companies over two months.

The banking industry of the country has seen expolitation of various loopholes in the system during recent times, coming after the fore mentioned scenario, the ICICI Scandal, the Nirav Modi Scam. The Indian banking sector needs to act fast and pull up their socks, so as to keep the wheels of the economy running.

– Aastha Pandey

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