The Rotomac fraud case is about Vikram Kothari from Rotomac Global Pvt Ltd who received loans worth Rs 800 crore from seven public sector banks between 2008 and 2017 using forged and incomplete documents. He said that the loans were for paying international suppliers, yet in reality, he siphoned the cash through shell companies aimed at washing dirty money. An investigation was carried out by the ED, IT, and CBI who found that Rotomac was running an import-export business through companies that only exist on paper. Vikram Kothari together his son Rahul Kothari are in detention over allegations of embezzlement and money laundering. The NCLT has also directed that Rotomac Global and Exports be wound up.
Analysis –
CBI has taken Vikram Kothari, the owner of Rotomac Pens, and his family into custody for questioning about false charges. CBI registered a case against him after Bank of Baroda raised a complaint against Kothari, Rotomac’s directors including Kothari himself, his wife Sadhana and young son Rahul as well as some unidentified bank officials. Kothari and his associates allegedly took out Rs 3,695 crore from seven public sector banks. Kothari was detained and accused of using the loans for grain “imports” rather than his pen business.
It has been reported that Kothari, who was believed to be the owner of Kanpur’s Rotomac, managed to borrow as much as Rs 2,919 crore from seven banks, including Allahabad Bank, Bank of India, Indian Overseas Bank, Bank of Baroda, Oriental Bank of Commerce, Bank of Maharashtra, and Union Bank of India. He defaulted on both principal and interest payments. As per the complaint lodged by the Bank of Baroda Rotomac has defrauded a consortium of seven banks by diverting bank loans amounting to Rs 2,919 crore. This is the principal amount only, the interest obligations have been left out according to one CBI official. “The total outstanding amount including interest liabilities stands at Rs 3,695 crore.”
Reports claim that Bank of India took the lead in the consortium and approved Rs 754.77 crore, Bank of Baroda approved Rs 456.63 crore, Indian Overseas Bank okayed Rs 771.07 crore, Union Bank of India had no problem with Rs 458.95 crore, Allahabad Bank sanctioned Rs 330.68 crore, while Bank of Maharashtra sanctioned Rs 49.82 crore, and Oriental Bank of Commerce had no problem with Rs 97.47 crore.
After this complaint, CBI launched a case and searched Kothari’s residence and office locations in Kanpur. CBI carried out search operations at three places in Kanpur and questioned directors who were all three in number.
Mode of operation: It has been reported that though the loan was sanctioned and money disbursed to Kothari to import wheat from a Singaporean firm, it was not the purpose for which the loan was obtained. Alternatively, it was cleared for some other enterprise and finally sent over to Rotomac “They sought loans from banks to import wheat from Bargadia Brothers Company in Singapore”.
Nonetheless, when the approval was given, the funds were not utilized to buy wheat. Originally, the funds were channeled to the Bargadia brothers only for them to return to Rotomac, without any export orders being fulfilled, “This round-tripping of money is tantamount to misappropriation of funds, criminal breach of trust, and violation of FEMA guidelines,” an official said.
“He said closer: ‘Most of the transactions of this enterprise are done with few buyers and sellers: mostly the sister companies, and subsidiaries of this enterprise.’ Foreign exchange rates were the bet by this company as insiders say. This company wanted an interest rate difference that exists within local and international currencies.” The accusation came days after Punjab National Bank found a Rs 11,300 crore fraud where tycoon Nirav Modi and his uncle Mehul Choksi were provided letters of undertaking from a Mumbai branch to secure loans from overseas lenders.
It was reported that in two months, PNB issued 143 Letters of Undertaking (LOUs) and 225 Foreign Letters of Credit worth Rs 4,886.72 crore to three of Choksi’s companies. Additionally, in February 2017, similar LOUs were given to Modi’s companies whereupon eight were captured by the CBI’s first FIR.
Bibliography –
1.The print – written by Anannya Bharadwaj
https://theprint.in/report/rotomac-fraud-worth-rs-3695-cr-owner-vikram-kothari-family-cbi-custody/36689/
2.National institute of bank management – by Rajesh Ramakrishnan and Smita Roy Trivedi
https://www.nibmindia.org/documents/300/Case_Study_8_Rajesh_Ramakrishnan.pdf
3.Live mint – by Zafar Irshad
https://www.livemint.com/Industry/3DFT2LURVA2yEQE5vBw3DL/The-rise-and-fall-of-Rotomacs-Vikram-Kothari.html
Written by- Dhrati Garg, 3rd year of BALLB, Dharmashastra National Law University.
