The CBI has opened a case against the promoter director of Mumbai-based Varun Industries Ltd (VIL) for allegedly defrauding a banking syndicate of more than Rs 388 crore, leading to yet another non-performing asset case.
In two FIRs registered, the CBI accused the promoters and directors of VIL, Kiran Mehta and Kailash Agarwal, of misappropriating a credit facility of the Central Bank of India (CBI) amounting to Rs 2,692.9 crore. According to complaints received by the investigative agency, VIL had secured various lines of credit from the Central Bank of India (part of a consortium led by Indian banks) in September 2011. It has secured a working capital term loan facility of Rs 2,921.5 crore. Included in the limit is a term loan of Rs 194.5 crore, but approved outside a consortium of banks, for a windmill power project in Jaisalmer, Rajasthan, CBI officials said.
The complaint alleges that VIL failed to remit export payments in the sale of goods received under the letter of credit to satisfy the import link of the merchant transaction. At VIL’s request, the bank issued a commercial trade letter of credit. In its FIR, the CBI said transactions under this category were allegedly dishonestly intended to defraud the banks.
The company also allegedly acted as the agency to administer the discounting of export bills, or advance payments on export bills collected by its affiliates, Al Rad International Trading Est UAE and White Impex General Trading LLC, UAE. CBI officials said the associated companies failed to honor the bills and later wrote them off in their books.
From 2009 to 2012, the outstanding amounts of the two UAE companies increased significantly. The CBI suspects that these entities were used as conduits to transfer funds from banking channels with the dishonest intention of not repaying the funds.
Canara Bank Case
In its second FIR, the CBI accused the promoters and directors of VIL of defrauding the erstwhile e-Syndicate Bank (e-Syndicate Bank) of Rs 1,188.8 crore, which was later incorporated into Canara Bank.
Another fraudulent transaction allegedly carried out by the company was the solicitation of packaging credit line (PCL) facilities for the export of steel and kitchenware. On at least three occasions, the complaint alleges, steel and kitchenware items were not disposed of by PCL beneficiaries. Rs 11,670 crore was involved in claiming the three PCL facilities and investigators suspect that the money was diverted for other activities.
The FIR revealed that VIL primarily deals with Al Rad International Trading and White Impex General Trading LLC, as most of the sales shown relate to only those two companies. On the other hand, VIL and its group companies are the only suppliers to these two Dubai companies.
The CBI is also investigating criminal misconduct by civil servants as to why PCL credit was allowed when beneficiaries did not handle steel and kitchenware items.
