Delhi police charge textile firm in Rs 650-crore fraud case

A textile company is under investigation by the Delhi police Economic Offences Wing for fraudulently procuring loans worth Rs 650 crores from approximately 29 financial institutions. Fictitious documents were used by the company and according to police the accused are still at large.

Last week, a complaint was filed on behalf of the Reserve Bank of India (RBI) by a private bank with Delhi police Economic Offences Wing (EOW) against the managing director and three directors from Shamken Group of Company (SGC).

The complainant told police that the company used to submit forged documents at banks to sanction loans for purchasing machinery and other equipment.  During the probe it appeared that SGC had submitted different invoices to obtain loans from various banks on a single piece of equipment.

The company was reportedly active since 2000 and enjoyed loan facilities under four sub-companies-- Shamken Multifab Limited, Shamken spinners Limited, Shamken Consyn Limited and Dwarikadhish Spinners Limited. All these sub-companies have now been slapped with cheating and forgery charges.

In 2000, the managing director, HB Chaturvedi, along with his three directors — Amit Chaturvedi, Sumit Chaturvedi and Sanjay Chaturvedi approached South Indian Bank in Connaught Place for a loan worth Rs 10 crore to buy equipment. After the recipients defaulted on the loan, it was understood that the company had defrauded other financial institutions by using false documents. 

The matter was reported to RBI, who instructed the bank to lodge a police complaint. But Delhi police failed to make any arrest in 2001 after the complaint was filed at Connaught place police station. In 2003, IDBI, another financial institute, had sanctioned huge credit facilities to SGC and later got wind of the forgery. The bank then appointed ANG & Associates, a Charted Accountants Firm, to conduct a detailed investigation.

Initially, the investigation could not be commenced due to stiff resistance from SGC. In 2004, IDBI was successful in pushing the Special Investigation Audit (SIA) conducted by ANG & Associates, who then submitted a detailed report on SGC.

The SIA report revealed that SGC had committed fraud to the tune of Rs 650 crores, which involved 29 banks by suppressing factual financial data.

IDBI was subjected to the biggest fraud in 2003-2004, after which in 2005 RBI had filed a complaint with Delhi police. However, no action was taken during that time too.

During the investigation it was observed that the modus operandi of the company was to submit false status report on project implementation and arrival of machinery, material misstatement in 

the audited balance sheets and annual reports that reflected exaggerated additions to gross block, without having incurred expenditure at that level.

With no help from the district police, the complainant approached EOW on 25 April and lodged their complaint against the company. ‘Investigation is underway and we have contacted the accused company at their registered office in south-east Delhi.

 

A case under the sections 120 B (criminal conspiracy), 406 (criminal breach of trust) and 420 (cheating) of the Indian Penal Code has been registered against the company and five other persons, including the managing director,’ the official added.