The Central Bureau of Investigation had booked Frost International Limited (FIL) and 14 others for allegedly cheating a Bank of India-led consortium of ?3,592.48 crore and the unpaid interest. Look-out circulars were issued against the several accused persons.
Among those named were company directors Uday Jayant Desai and his son Sujay, daughter Sanjana and wife Nilima; Sunil Lal Chand Verma, his wife Rita and sons Nipun and Saral; and Anoop Kumar Baldevraj Wadhera and his wife Poonam.
Three other companies — R.S. Builders, Globiz Exim and NSD Nirman — were arraigned.
Incorporated in 1995 and promoted by Mr. Desai and Mr. Verma, FIL trades in agro-commodities, minerals, metals, bullion, polymer, chemical and petroproducts, plastics and textiles. It had suppliers and buyers in Bangladesh, China, Hong Kong, the United Arab Emirates, the United States, West Indies, China, Cambodia, Saudi Arabia, Switzerland and Taiwan.
According to the FIR, the company had taken ?380.65 crore in credit from the Bank of India before the consortium of 14 banks was formed in 2011. In all, it availed itself of ?4,061.95 crore in credit. The Bank of India had the highest exposure of ?756.75 crore. FIL had also raised ?498.51 crore through loan from the Indian Overseas Bank.
A stress in the loan accounts was noticed from January 2018, when the letters of credit started devolving with the member banks, as export proceeds were not realised. The accounts soon turned non-performing assets, and were declared a fraud last year.
A forensic audit report in January 2019 raised suspicion about funds diversion under the pretext of unsecured loans to group concerns, including Mohan Steels, Commet Overseas, Viva Merchants and Fisco Metals India. It found instances of no actual export of goods. There was a mismatch in the ship movement data. with those from the loading and discharge ports.
A mismatch was also observed in 18 merchant trade transactions; a majority of payments towards sales were received from third parties; purchases worth ?4,374.17 crore and sales worth ?4,411.48 crore were executed among parties having common key managerial personnel.
Also, purchase and sale transactions amounting to ?9,822.63 crore and ?9,889.09 crore were among the parties known to each other.
The report noted that as per the credit report of one Fareast Distribution & Logistics Pte Limited (FDLPL), the Hong Kong-based firm Fausta Limited, involved in providing financial services, held 100% stake in FDLPL.
The address of Fausta Limited was the same as that of Gulf Distribution Limited, indicating that both were linked. FIL was involved in purchases worth ?31,398.58 crore from FDLPL and sales of ?23,426.66 crore to Gulf Distribution Limited from 2012-13 to 2017-18.
It is alleged that when the lead bank wrote to 10 parties owing money to FIL, it did not receive any response. The banks allege that the company and its promoters showed trade without having genuine business transactions and defaulted on repayments. The funds were allegedly diverted.
At the Bank of India’s request, the look-out circulars were issued against Mr. Desai and 10 others in January 2019. In October 2018 too, the circulars were issued against him and 13 others, at the instance of the Indian Overseas Bank.
Searches are being conducted at 13 locations, including on the premises of the current and former company officials, in Delhi, Kanpur and Mumbai, a CBI official said.
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