CBI books Frost International, directors in Rs 3,592 cr fraud
The CBI has registered the case based on a complaint of fraud from Bank of India, the lead bank in the consortium. Also LOCs have been issued against 14 officials
New Delhi: With the first month of the new decade yet to end, the CBI has registered yet another bank fraud case running into thousands of crores - this time against Mumbai-based Frost International Limited and its directors for allegedly defrauding a consortium of 14 banks of Rs 3,592.48 crore by way of purported diversion and misappropriation of funds. The Central Bureau of Investigation has registered the case based on a complaint of fraud from Bank of India, the lead bank in the consortium, which has the largest exposure in the case.
Besides, a Look-Out-Circular (LOC) has also been issued for 14 of the company officials and guarantors of the company, including Founding Director Uday Jayant Desai and his son Sujay Uday Desai to prevent them from leaving the country. The circular will help immigration authorities at all entry and exit points of the country to identify the accused if they tried to leave India. While investigative agencies usually call for LOCs to be issued, owing to a rise in wilful defaulters escaping the law, the government had provided for banks to issue LOCs if required recently, as per which the consortium had gotten the LOCs issued.
The CBI also conducted searches at the offices and residence of the company, its officials and guarantors on Tuesday in Mumbai, Delhi and Kanpur. Officials here said that the raids were conducted at 13 locations spread across the three cities and that several incriminating documents were recovered in the operation.
According to the complainant banks, Frost International Limited and its officials had allegedly conspired to defraud the banks by accessing credit facilities under the pretext of undertaking merchanting trade, "without having any genuine business transactions and defaulted in meeting its payment obligations" to the consortium. The banks have alleged that the company and its promoters had diverted and siphoned off loan amounts for wrongful gain to themselves by alleged acts of misappropriation and criminal breach of trust.
Frost International was founded by Founding Director Uday Jayant Desai and has his son, Sujay Uday Desai as a Director and Guarantor of the company. In addition, the CBI has also booked corporate guarantors of the company in the bank fraud case.
According to a forensic audit commissioned by the lending banks, the company books had revealed a series of transactions between parties known to each other. The report said that purchase and sale transactions worth around Rs 19,000 crore was observed among such related parties - who are already either customers or vendors of Frost International.
In fact, the audit report also found that the accused company had given unsecured loans and advances of around Rs 416 crore to non-business related parties. Moreover, the audit report also found that purchase and sale transactions worth over Rs 8,000 crore were shown between entities with common managerial personnel.
The central agency has also accused Frost International of not conducting any genuine export of goods against merchant trade transactions. The FIR alleged that while steam coal and bituminous coal were shown to be imported from Indonesia in September 2017, there was no record of such export from Indonesia during the concerned period. Frost International's total default amount comes to around Rs 4,061 crore.