First sign of Kanishk trouble detected in March 2017: SBI

According to the complaint filed by GD Chandrashekar, General Manager of SBI’s Mid Corporate - I, Chennai region, Kanishk Gold Pvt Ltd (KGPL) and its directors, in collision with the statutory auditors and others, have been misrepresenting and falsifying the records and financial statements since 2009, showing a rosy picture to avail of credit facilities from the banks. 

The first sign of sickness was noticed when the company delayed servicing interest to eight banks for March 2017. The next month, it did not pay interest to any of the member banks. When the stock audit was initiated on April 5 for the quarter ending March 2017, the promoter was unable tow follow up. Sources said the consortium members could spot no activity when they visited the corporate office, factory and showrooms on May 27. 

“On the same day, Jain gave a letter admitting falsification of records since 2009 and removal of the stocks secured to the lenders,” it was noted. On May 30, the banks conducted a joint inspection only to find that there was no stock in the factory and the showrooms were locked. 

A forensic audit revealed that there were misrepresentation and falsification of records, diversion of funds and disposal of the stocks by the company. The statutory and stock auditors failed to record the deficiencies in the financial records and assets registers of the company, it was found. 

It was in 2008 that SBI first extended a Rs 50 crore loan to KGPL. In the same year, the firm obtained Rs 10 crore in term loans from ICICI Bank. 

This banking arrangement was converted into multiple banking arrangement with Punjab National Bank and Bank of India in 2011. The next year, the arrangement was converted into a consortium. SBI was the lead bank in respect of working capital credit facilities sanctioned with the option to avail of cash credit (Hypothecation), metal gold loan and bank guarantee. 

To avail credit, the KGPL provided credit monitoring arrangement data based on the performance of the company. Based on the audited financial statements it submitted, the banks consortium enhanced the KGPL’s working capital limit from Rs 50 crore in 2008-09 to Rs 747 crores in 2016-17.