The Enforcement Directorate (ED), Chennai zone, continued to come down heavy on Kanishk Gold Pvt Ltd (KGPL) for a second time in three days. Yesterday, the ED attached the company's fixed deposits worth over Rs 143 crore along with the interest accrued on it under the Prevention of Money Laundering Act (PMLA).
Earlier this week, the ED had seized land, buildings along with a plant and machinery worth Rs 48 crore, available on the factory premises of KGPL in Pukkathurai village in Tamil Nadu's Kancheepuram district. The total properties frozen or attached in this bank fraud case stands at Rs 191 crore as on date.
What was the case again?
KPGL, a company that manufactured gold jewellery, is accused of defaulting on a 14-bank consortium loan of Rs 824.15 crore. The CBI had registered an FIR against the company on March 21 based on a complaint from State Bank of India (SBI), which alleged that "Kanishk Gold and its directors in collusion with statutory auditors" had a "clear criminal/malafide intent" to "cheat and defraud" the banks and to "gain illegal profit" by "misrepresenting/falsifying the record and financial statements of the company".
The complaint added that the loans to Kanishk Gold date from 2007. In 2008, SBI took over the loans from ICICI and in March 2011, the entire amount was converted into a multiple banking arrangement with Punjab National Bank and Bank of India. The following year, the consortium with SBI as lead bank, sanctioned granting of metal gold loan (MGL) to KGPL. Using this option, "Kanishk used to purchase gold in the form of bullion either from nominated banks in the consortium or from the open market by utilising credit under MGL or from under current account," said SBI in its complaint.
In the next few years, State Bank of India extended loans worth Rs 215 crore, Punjab National Bank gave Rs 115 crore, Union Bank of India's Rs 50 crore matched by Syndicate Bank, Bank of India and IDBI Bank gave Rs 45 crore each, and several other banks dished out comparatively smaller amounts. The list also includes Bank of Baroda, HDFC Bank and ICICI Bank.
According to the complaint, KGPL first defaulted on payments of interests to eight banks in March 2017, and it stopped making payments to all 14 banks from April 2017. The total loss caused to the banks was over Rs 824 crore, as on December 31, 2017 and SBI had previously claimed that the security available with it to cover the "loss" is only around Rs 156.65 crore.
The ED subsequently registered a case against the company, its directors as well as its auditors under PMLA.
What the authorities discovered
"It was later realised that stock statements were fudged with the help of chartered accountants and on inspection by the banks in May 2017, it was found that no stocks existed and effectively all the operations came to standstill," the ED said in a statement earlier.
The agency added that a forensic audit was conducted to identify fraudulent statements of financial reports, diversion of bank funds, siphoning of funds and asset stripping during the period from 2009 to 2017. "But, the audit found that there was misrepresentation and falsification of records, diversion of funds and disposal of the stocks by the company which led to the total loss caused to the banks," it added.
During further investigations, ED found that falsification of records was admitted and it was stated that the stock gap between the actual and reported to banks has risen to 3,000 kg of gold by 2017.
According to The Times of India, the authorities also noticed that around Rs 300 crore was paid by KGPL to one jeweller's account but forensic audit observed that there were no evidences of receipt of gold for the said payments. ED investigations subsequently revealed that the beneficiary bank account was used for money laundering purposes earlier also.
With agency inputs