The Central Bureau of Investigation on Tuesday carried out searches at various locations in Mumbai and Uttar Pradesh after filing a case against Frost International Ltd, a Mumbai-based company involved in merchant trading and import and export of various commodities, and its promoters on charges of cheating a consortium of banks worth Rs 4,061.95 crore in 2011.
The CBI teams carried out searches two days after the agency registered an FIR against some unidentified bank officials, the firm and 13 individuals, including promoters Udai Jayant Desai, Sujay Udai Desai, Sunil Lal Chand Verma and Anoop Kumar Wadhera, directors and guarantors of the company.
The searches were conducted at 13 places, including the office premises of the private companies, and at the residential premises of the present and past directors, guarantors of the company in Mumbai (three places), Delhi (four places) and Kanpur(six places).
In its FIR filed on January 19, the agency has framed charges against Frost International and others for cheating a consortium of 14 banks led by Bank of India to the tune of Rs 4,061.95 crore Bank of Baroda (BoB), Canara Bank, Central Bank of India, Andhra Bank, Oriental Bank of Commerce, Punjab National Bank, Syndicate Bank, Union Bank of India, Indian Overseas Bank, UCO Bank, Vijaya Bank, Allahabad Bank and United Bank of India are the other banks in the consortium.
Look Out Circulars (LOC) have also been issued against all of them at airports and entry-exit points across India so that they don't leave the country.
As per the complaint filed by Bank of India's Kanpur branch, Frost International had been banking with it and other banks in the consortium since 1996.
The FIR says in the loans taken from the consortium, BOI has the highest exposure of Rs 756 crore which the company has not repaid.
The stress in the account is observed from January 2018 onwards in the consortium of 14 banks, when Letters of Credit started devolving with member banks as export proceeds were not realized, the FIR said.
"The company could not deposit the overdue amount and account is classified as NPA (Non Performing Asset) by all the member banks."
The consortium later decided a forensic audit and its report dated January 5 last year found that there was a potential diversion of funds by way of providing unsecured loans to group companies and that there was no actual export of goods against merchant trade transactions.
It also found purchases and sales took place among parties known to each other and that the majority of payments towards sales were received from third parties and not from the parties to whom the goods were sold.
The company is engaged in trading of multiple agro commodities, minerals and metals, bullion, polymer, chemical and petroleum products, plastic, textiles and other items.
It has suppliers across the globe including Bangladesh, China, Hong Kong, the US and the UAE, West Indies, Cambodia, Saudi Arabia, Switzerland and Taiwan.
Frost International Ltd registered office is in Bandra Kurla Complex, Mumbai, its head office and international marketing division is in Hospitality District, New Delhi and the corporate office is in Kanpur.
The company allegedly diverted the banks' fund by giving unsecured loans and advances to its non-business related parties, the FIR said.
"There were variations in sales and purchase prices of non-Merchant Trade transactions and some of the non-Merchant Trading parties were found non-existent and mismatch in Merchant Trade transactions, with either port of loading and discharge or mismatch in the date of vessel movement.
"Inordinate time gap has also been observed in some of the bills of lading date compared to the vessel exit date at the same port. All these factors indicate that there was no actual export of goods against the Merchant Trade transactions.
"It was also alleged that the private company had submitted list of debtors, against whom it did not initiate any action for recovery of their dues, even after the outstanding remained for more than 12 months," the FIR said.
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