THE ROTOMAC FRAUD (FSRH X)

Updated: Mar 29, 2021

Introduction


The scam began in 2008 and it amounted to misappropriation of funds, criminal breach of trust and violation of FEMA (Foreign Exchange Management Act) guidelines. This came at a time when banks are already facing increasing NPA crisis with similar frauds unvieling every other day.


The case was registered because of a complaint by the Bank of Baroda (BoB) against Rotomac Global Private Ltd, and its directors Vikram Kothari, Sadhana Kothari, Rahul Kothari and some unindentified banks officials.


The CBI has booked Kanpur-based businessman Vikram Kothari, his wife and son in connection with the alleged swindling of Rs 3,695 crore of loan funds including accrued interest.


The Findings of Rotomac Scam


Initially, the alleged scam was estimated to be of Rs 800 crore, but after the CBI started to probe into the accounts of the company, it was found that the company had allegedly taken loans from 7 PSBs with Bank of India leading, having sanctioned an amount of Rs 754.77 cr. The company was given bank loans from 2008 onwards by a consortium of banks led by Bank of India which have swelled to Rs 3,695because of repeated defaults on payments.

How Rotomac Scam Happened?

It is alleged that loans were being siphoned off by diverting them from the purpose for which they were taken.

The company adopted two different methods for diverting the funds–loans for exports were round tripped from abroad and loans taken for purchasing export goods were used domestically without executing any export order.

In a case, the company was given loan to export wheat to Singapore but it is alleged that Kothari transferred the money to a Singapore-based company Bargadia brothers which sent remittances back to the account of Rotomac Global without any export on ground. In some other cases, money disbursed by the banks for procurement of goods to export was not utilized and no export order was executed by the company. These are violations of the Foreign Exchange Management Act, misappropriation of funds and criminal breach of trust as the funds given by the banks for specific purposes should be used for the same. The banks have alleged most of the transaction of this company was with limited number of buyers, sellers, sister companies and subsidiary of the company with no genuine business activities.

It is also alleged that the company was using shell companies for carrying out this alleged round tripping operation and had also submitted fake and forged documents to “induce” banks to advance money to it.

The agency conducted searches across three places in Kanpur and questioned all three accused directors. The agency also sealed residential premises belonging to Vikram Kothari as well as an office of Rotomac directors in NewDelhi.


According to a latest information, CBI had arrested Rotomac Global Private Limited’s promoter-director Vikram Kothari and his son in the loan default case and the Enforcement Directorate has attached assets worth Rs. 177 Crore in connection with its money laundering probe and the investigation is going on.

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