The Central Bureau of Investigation (CBI) has previously registered multiple FIRs against Kanpur-based well-known pen manufacturing firm Rotomac Global for defrauding banks and failing to make loan payments.
The CBI has charged the company and its directors with defrauding the Indian Overseas Bank of Rs 750.54 crore this time.
According to officials familiar with the situation, the pen-making company has a total outstanding of Rs 2,919 crore against a consortium of seven banks led by Bank of India, in which Indian Overseas Bank has a 23% stake. The CBI has charged the company and its directors, Sadhna Kothari and Rahul Kothari (also charged in another bank defrauding case) with violating sections 120-B (criminal conspiracy), 420 (cheating), and other provisions of the Prevention of Corruption Act.
The Indian Overseas Bank alleged in its complaint to the CBI that on June 28, 2012, Rotomac Global was granted a non-fund-based limit of Rs 500 crore. Non-fund-based finance is not physical funding, but rather a promise of financial support compared to actual funds. Bank guarantees and letters of credit are examples of non-fund credit limits.
The bank claimed it issued 11 Letters of Credit (LC) to meet the company’s foreign trade requirements, all of which were devolved for a total of Rs 743.63 crore, leaving the bank with no security.
According to the bank’s complaint, Rotomac Global did not provide the complete set of documents for the trade it conducted, and all letters of credit were issued in favour of two parties: Farest Distributors and Logistic P Ltd and RBA Venture Ltd.
The bank’s forensic audit revealed alleged account book manipulation and non-disclosure of liabilities arising from letters of credit.
The audit also found irregularities in sale contracts, bills of lading, and corresponding voyages, and revealed that 92% of total sales, amounting to Rs 26,143 crore, were made to four parties affiliated with the same owner and group.
‘The major supplier to these parties is Rotomac Group, whereas the major buyer for these parties is Bunge group. The major seller of products to Rotomac group is Bunge group. All the four overseas customers have links with the group,’ the bank alleged.