Is multi-crore Rotomac bank scam headed for a burial?

The tardy pace of probe by the central agencies such as CBI, ED, SFIO and IT is a drag on the Rs 4,500-crore Rotomac Bank fraud case against the pen makers. Will it be buried in the pages of history like other bank frauds without recovering NPA amount?  A report by Mudit Mathur

Rotomac Bank fraud amounting to Rs 4,500 crore is all set to be diluted due to undue delay by the investigation led by multiple agencies of the government including Central Bureau of Investigation (CBI), Enforcement Directorate (ED), Serious Fraud Investigation Office (SFIO) and Income Tax (IT). Will it be buried in the pages of history like other bank frauds without recovering NPA amount?

The investigations into murky corporate fraud of Rotomac group once again came into the focus this month after the Supreme Court confirmed its orders of anticipatory bail to the former Directors of Mohan Steel Limited in a case linked to alleged company fraud of Rs 4,500 crore caused to a consortium of 14 banks, in which the Promoters and Directors of the Rotomac Group of Companies and Frost International Limited are also facing trial.

This was the second major financial scam that broke out after the sensational Rs 11,400 crore fraud allegedly committed by billionaire jewellery designer Nirav Modi and his uncle Mehul Choksi, as a promoter of Gitanjali group of companies. Both left the country defrauding the Punjab National Bank before its officials could realise the seriousness of the scam. In Rotomac Bank fraud cases, all the accused have been enlarged on bail and main accuse Vikram Kothari died.

Earlier on 26th May 2022, the bench of Justice Om Prakash (VII) of the Allahabad High Court, which had earlier rejected bail application, however, reconsidered bail plea and directed the release of Kanpur-based Rotomac Global Company owner Rahul Kothari on interim bail in a case relating to corporate fraud filed by SFIO on the basis of the reports of Ministry of Corporate Affairs and CBI. He allowed his application on humanitarian consideration keeping in view the serious illness of his mother Sadhna Kothari and death of his father Vikram Kothari. On the other hand, a bench comprising of Justice Sanjay Kishan Kaul and Justice Abhay S. Oka in its order observed that it is not disputed that the appellants Mohan Krishna Kejriwal, Gopal Kejriwal and Sri Krishna Kejriwal have been cooperating with the investigation and the whole issue arises out of records and documents. “In view of the aforesaid facts and circumstances, the order dated 30.03.2022 is made absolute,” the court said. On March 30, the court granted interim protection from arrest to former directors of the private company and directed them to cooperate with the investigation.

The affairs of Vikram Kothari led Rotomac group and its interconnected shell companies had been under the scanner of these agencies since 2018 but no remarkable success has ever come to light. The main accused, Rotomac Group promoter Vikram Kothari, 73, mysteriously died at his Kanpur residence in the last January after slipping in his bathroom, leaving unfinished trial and ongoing incomplete investigations.

The CBI and the Enforcement Directorate investigations are going on in multiple other bank fraud cases. In February 2018, the CBI had arrested Kothari and his son Rahul Kothari in an alleged Rs 3,695-crore “wilful” loan default case. They were released on bail by High Court after spending nine months in the jail.

Kothari, owner of the Kanpur-based Rotomac, had allegedly taken loans amounting to Rs 2,919 crore from seven banks, including Allahabad Bank, Bank of India, Bank of Baroda, Indian Overseas Bank, Oriental Bank of Commerce, Bank of Maharashtra, and Union Bank of India. He allegedly did not pay back either the loaned amount or the interest. “In the complaint lodged with CBI by Bank of Baroda, it was alleged that Rotomac cheated a consortium of seven banks by siphoning off bank loans to the tune of Rs 2,919 crore. This is just the principal amount and does not include the interest liabilities of these loans”.

In February 2018, the CBI filed its first case against Rotomac and Vikram Kothari for allegedly cheating a consortium of seven banks including Bank of Baroda, Indian Overseas Bank, Union Bank of India, Allahabad Bank, Bank of Maharashtra and Oriental Bank of Commerce and Bank of India for allegedly defrauding them of Rs 3,695 crore.

It was alleged that Kothari got loans disbursed based on foreign letters of credit (FLCs) on the pretext of making payments to his buyers and suppliers in places like Dubai, Sharjah and Hong Kong but they didn’t exist. The Kotharis allegedly provided incomplete documents or photocopies of bills of loading to the banks on the pretext that original papers were sent to the importer.

The banks had alleged in the FIRs filed with CBI that Rotomac did not attach the packing list, mandatory insurance copies of goods, certificate of origin of goods, or the inspection certificate from third parties while submitting documents to it. When bank officials visited Rotomac’s suppliers and buyers abroad, they found that the import/export business was allegedly running through shell companies.

Later, a second case was registered in February 2020 against the company for allegedly cheating Allahabad Bank of Rs 36 crore. In the latest FIR, CBI has alleged that the company took loans over a period of time from Bank of India for which there is outstanding of Rs 806 crore.

The Central Bureau of Investigation (CBI) has filed a case against pen manufacturer Rotomac Global Pvt Ltd and its promoter Vikram Kothari, his wife Sadhna Kothari and son Rahul Kothari for allegedly cheating Bank of India of Rs 806 crores. It has been alleged that company diverted most of the funds taken from the bank. With three cases registered by CBI, total amount pertaining to bank fraud involving Kanpur based Kotharis comes to around Rs 4,500 crore.

It was reported that Bank of India is the consortium leader, which sanctioned Rs 754.77 crore. Bank of Baroda gave Rs 456.63 crore, Indian Overseas Bank loaned Rs 771.07 crore, Union Bank of India sanctioned Rs 458.95 crore, Allahabad Bank gave Rs 330.68 crore, Bank of Maharashtra gave Rs 49.82 crore and Oriental Bank of Commerce sanctioned Rs 97.47crore.

The Rotomac Pens Private Limited company was incorporated in 1992 and had diversified its business into various segments, including import/export and trading of food grains, heavy industrial equipment, various electronic items, polymers, scrap, gems and jewellery, coal and iron ore. It was renamed as Rotomac Global private Limited in 2008.

It was disclosed in the FIR, the accused persons adopted various means to cheat the bank. The funds which were directed to group companies, Crown Alba Writing Instruments India Private Limited and Rotomac Polymers Private Limited were misappropriated. A forensic audit also revealed several financial irregularities in the account books.

The group had shown foreign exchange losses of Rs 1,578.71 crore in 2013-14 and Rs.159.50 crore in 2014-15. It raised a debit note of Rs.1,273 crore on four linked parties and concealed the losses. Rotomac Exports Private Limited showed forex losses of Rs.1,207.49 crore in 2013-14 and Rs.110 crore in 2014-15, it is alleged.

In many cases, as alleged, the place of issue of Bill of Loading was China or Dubai, despite the fact that they were neither entered at the loading port nor the discharging port. The company routed Rs.1,226.51 crore through non-consortium banks in 2013-14 and Rs.479.52 crore the next year. During 2018-2020, the CBI had booked Rotomac Exim (P) Limited, Vikram Kothari, his son Rahul and others for allegedly cheating the Allahabad Bank of Rs.36.84 crore.

The first case was registered in February 2018 against Rotomac Global Private Limited, Kothari, his wife and their son in an alleged Rs.3,695-crore loan default case. Kothari and his son were also arrested. They were accused of cheating a consortium of seven banks led by the Bank of India. In May 2018, the agency filed the first chargesheet against Rotomac Global Private Limited, the Kotharis and three bank officials, accusing them of cheating a consortium member, Bank of Baroda, of Rs.456.63 crore.

The Income Tax Department had taken action against the Rotomac group and its promoter attaching 11 bank accounts in connection with an alleged tax evasion probe against them.

Modus operandi

It was revealed that 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, BargadiaBrothe 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,” surfaced during in depth investigation.“Most of the transactions of this company are with limited number of buyers, sellers, sister companies, and subsidiaries of this company.”

Even after long period of more than four years, the multiple agencies failed to secure conviction of accused persons defrauding huge amount of seven Banks allegedly committing serious violation of company laws and indulging in money laundering. The unexpected slow pace of multiple investigation has marred the chances of speedy trial securing conviction of accused persons in a big bank fraud case.