CBI registers case against Chennai-based Kanishk Gold for cheating SBI and 14 banks consortium of Rs 824 crore, searches on across Chennai

In yet another fraud played on banks, a Chennai-based jeweller Kanishk Gold Pvt Ltd (KGPL) has been accused of defrauding a consortium of 14 banks led by the State Bank of India (SBI) to the tune of Rs 824 crore in the form of loans that have now been declared as non-performing asset (NPA).

It is apprehended that the Directors of the KGPL, Bhoopesh Kumar Jain, and his wife Neeta Jain may have fled the country.

Unlike the scam involving diamond jeweller Nirav Modi and Mehul Choksi of the Gitanjali Group worth Rs 13,540 crore, in which Letters of Undertaking (LoUs) were used, the KGPL allegedly resorted to falsifying records and financial statements to get loans from the banks over a 10 year period beginning 2008.

The SBI tops the list with Rs 240 crore of loans followed by Punjab National Bank (PNB) (Rs 128 crore), Bank of India (Rs 46 crore), IDBI (Rs 49 crore), Syndicate Bank (Rs 54 crore), Union Bank (Rs 53 crore), Uco Bank (Rs 45 crore), Central Bank (Rs 22 crore), Corporation Bank (Rs 23 crore), Bank of Baroda (Rs 32 crore), Tamil Nadu Mercantile Bank (Rs 27 crore), HDFC (Rs 27 crore), ICICI Bank (Rs 27 crore) and Andhra Bank (Rs 32 crore).

In a complaint to the Central Bureau of Investigation (CBI) in January this year, the SBI cited a forensic audit conducted into the acounts of the company and found that the KGPL and its directors including Bhoopesh Kumar Jain and his wife Neeta Jain in collusion with the statuatory auditors had been misrepresenting and falsifying records with a clear criminal and malafide intent to cheat and defraud the banks.

The KGPL was accused of showing a rosy picture since 2009 for the purpose of availing credit facilities from the bank and thereby committed criminal breach of trust and cheated the lenders.

"The facts and circumstances and the admission by the Managing Director of the company also confirms the removal of the stocks secured to the lenders without the knowledge of the lenders and thereby committed criminal misappropriation of secured assets and cheated the lenders.

"It is also revealed that the KGPL and its Directors have diverted the funds detrimental to the rights and interests of the banks. The account has been classified as the NPA as per the extant guidelines of the Reserve Bank of India (RBI) by all the lenders of the consortium," said the complaint by G.D. Chandrasekhar, General Manager, SBI Mid Corporate Regional Office, Chennai.

The forensic audit revealed that the statutory auditors and stock audiotors had failed to record the deficiencies in the financial records and asset registers of the company which have adversaly affected the banks interests.

The forensic audit also revealed various discrepancies in the form of over valuation of the stocks and incorrect quantity of stock in the stock valuation workings records maintained by the company. The company had not maintained proper records for the movement of goods among other things.

The total loss to the banks due to the fraud is to the tune of Rs 824.15 crore (outstanding as on December 12, 2017) plus accrued interest from January this year. The security available with the bank to cover the loss is to the tune of around Rs 158.65 crore being the realisable value of the immovable properties, plant and machinery charged to the lenders.

The SBI complaint said in the joint lenders forum meeting on November 8 last year it was decided to proceed with the filing of complaint with the CBI after declaring the loan account as fraud.

The bank urged the investigating agency to proceed against the KGPL, its directors Bhoopesh Kumar Jain and his wife, its auditors Tejraj Achha, Ajay Kumar Jain, Sumit Kedia and other unknown persons.

It also said the role of the public servants if any may be looked into during the course of investigation.

The complaint said sign of sickness was noticed in the company delayed servicing interest for March 2017 in respect of eight members banks.

Further, the complaint said, interest was not paid for all the member banks for April 2017. The promoter was unavailable for follow-up. When the stock audit was initiated in April 2017 for the proceeding quarter, the KGPL did not facilitate stocks and receivables audit process.

Subsequently, in May last year, consortium members visited the corporate office, factory and showrooms and found that there was no activity.

On the same day, Bhoopesh Kumar Jain gave a letter admitting falsification of records since 2009 and removal of the stocks secured to the lenders.

Joint inspection was again conducted and it was observed that there was no activity and no stock in the factory. The showrooms at the other centres were also found locked during visits by consortium members.