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CBI books Varun Industries promoters in ₹388-cr bank cheating case

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The CBI has booked the promoter-directors of Mumbai-based Varun Industries Ltd (VIL) for allegedly cheating a consortium of banks to the tune of over Rs 388 crore, leading to yet another case of non-performing assets.

In one of the two FIRs registered, the CBI has charged that Kiran Mehta and Kailash Agarwal, promoters and directors of VIL, siphoned off the credit facility from Central Bank of India (CBI) to the tune of Rs 269.29 crore. As per the complaint received by the investigating agency, VIL took various credit facilities from Central Bank of India, which was part of the consortium led by Indian Bank, in September 2011. It accessed a working capital-term loan limit of Rs 292.15 crore. Included in the limit was a term loan of Rs 19.45 crore but sanctioned outside the consortium of banks for a windmill power project at Jaisalmer, Rajasthan, CBI officials stated.

The complaint alleged that VIL did not remit export payment from the sale of goods received under the letter of credit to meet the import leg of the merchant transaction. At the request of VIL, the bank issued merchant trade LC. The transactions under this head were allegedly committed with dishonest intend to defraud the banks, said the CBI in its FIR.

The company had also allegedly managed, as the agency, discounted export bills or obtained advances against export bills sent for collection to its associate companies, Al Rad International Trading Est UAE, and White Impex General Trading LLC, UAE. The associate firms did not honour the bills and, later on, wrote off the same in its books, the CBI official stated.

The outstanding amount from these two UAE-based companies significantly increased from 2009 to 2012. The CBI suspects that these entities were used as a conduit to divert the funds away from the banking channel with the dishonest intention of not repaying the funds.

Canara Bank case

The CBI, in its second FIR, has accused the VIL promoters and directors of fleecing the erstwhile e-Syndicate Bank, which has since been merged into Canara Bank, of Rs 118.88 crore.

Another fraudulent transaction the company allegedly did was claiming packing credit limit (PCL) facilities for the export of steel and kitchenware items. The complaint stated that, at least on three occasions, the beneficiaries of PCL were not dealing with the steel and kitchenware items. The amount involved in claiming the three PCL facilities was Rs 116.70 crore and the investigators suspect that it was diverted to other activities.

The FIR revealed that VIL was mainly dealing with Al Rad International Trading and White Impex General Trading LLC, as most of the sales turnover shown involved only them. On the other hand, VIL and its group of companies were the only suppliers of these two Dubai-based companies.

The CBI is also probing criminal misconduct of public servants owing to questions of why the PCL credit was allowed when the beneficiaries were not dealing with the steel and kitchenware items.



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