Rotomac Global, the famous pen manufacturing company that was under the CBI and ED scanner in 2018 for defrauding about 7 banks of Rs 3,695 crore, is again booked for defrauding Indian Overseas Bank of Rs 750 crore. Here's all you need to know about the scam.
If you are millenial or a 90s kid, you must have used or mabe seen your parents or siblings use a Rotomac ball pen. If not, you must have at least seen those ads of Salman Khan or Raveena Tandon endorsing Rotomac pens.
The brand that would endorse Indians to ''likho India ki nayi pehchan'', has managed to mark itself on the books, but for frauds.
First some context: In 1999, a certain Vikram Kothari became the Chief of Rotomac Pens. Over time, Vikram diversified the Rotomac business into Rotomac Global and ventured into real estate, malls, mouth fresheners, and agro exports. His export business was said to export rice, wheat, maize, gold, etc.
Now the Rotomac scam: Rotomac took loans from multiple banks for their export business till 2012. The loans were taken to procure goods and export agro products. But no export orders were executed. Instead, the loan money was diverted into related offshore accounts, and then redirected to Rotomac without executing any export order. Vikram Kothari was also accused of round-tripping ie selling a company's unused asset to another company and buying it back at the same price. In addition, Rotomac never repaid the interest and principal amounts on the crores of loans they took from more than 7 public banks.
Since this classifies as misuse of funds and violates various banking and forex rules, the authorities have charged serious cases against Rotomac.
How did it all begin? Though Bank of Baroda had first complained to CBI in 2018 of Rotomac defaulting on Rs 800 crore worth loans, CBI's investigations eventually found that 7 banks had collectively lent about Rs 2,919 crore to Rotomac for their export business:
1. Indian Overseas Bank – Rs 771.07 crore
2. Bank of India – Rs 754.77 crore
3. Union Bank of India – Rs 458.95 crore
4. Bank of Baroda – Rs 456.63 crore
5. Allahabad Bank – Rs 330.68 crore
6. Oriental Bank of Commerce – Rs 97.47 crore
7. Bank of Maharashtra – Rs 49.82 crore
In totality, considering the interest component on top of the principal component of Rs 2919 crore, Rotomac collectively owed Rs 3,695 crore.
So where did the money go? Investigations found that Vikram Kothari had round tripped bank's money. Like:
1. Credit sanctioned for wheat export orders to Singapore was diverted to a Singapore-based firm Bargadia brothers Pvt ltd. This money was then remitted back to Rotomac.
2, Many sanctioned loans for export order executions were used for other purposes.
3. Rotomac made profits from interest rate differentials between foreign and domestic currencies.
4. Rotomac had submitted forged documents to receive advance money from banks as many of Rotomac's suppliers and buyers actually operated from virtual offices.
5. Fraudulent front office companies were set up to facilitate business.
Thus, the CBI has charged promoter Vikram Kothari, his wife and director Sadhna Kothari, and son Rahul Kothari, who is also a director in the firm of many charges.
Now apart from this investigation, Rotomac also faced more cases:
September 2022- Rs 94 crore owed to Punjab National Bank: In September this year, the CBI booked Rotomac Global for cheating Punjab National Bank (PNB) of over Rs 94 crore through loan default. CBI has booked the directors of criminal conspiracy, cheating, and corruption. The directors Vikram Kothari and Rahul Kothari had acted dishonestly and had intentionally defrauded the bank by presenting wrong and false statements for book debts, stock statements and other financial papers. They had also frequently indulged in 'hawala' transactions, knowingly diverted funds, and submitted self-generated 'Bill of Ladings' from a company having no mention of any address and contact.
November 2022- Rs 750 crore owed to Indian Overseas Bank: Even though CBI has registered a case against Rotomac for defrauding the consortium, the CBI has now booked Rotomac again for defrauding the Indian Overseas Bank (IOB) through misrepresentation and causing monetary losses of Rs 750.54 crore. IOB has alleged that Rotomac was allowed a non-fund-based limit of Rs 500 crore on June 28, 2012, and had issued 11 Letters of Credit (LC) to meet the company's foreign trade requirements. But all the letters of credit got devolved involving an aggregate amount of Rs 743.63 crore, leaving no security for the bank. Rotomac's account was declared an NPA on June 30, 2016, and the losses were Rs 750.54 crore.
Rotomac also did not produce the complete set of documents for the trade carried out by it, which therefore raised doubts on the authenticity of the trade vessel and voyages claimed in the bills of lading. The bank conducted a forensic audit which pointed out that the books were manipulated, there were irregularities in sale contracts, bills of lading, corresponding voyages, and Rotomac's liabilities that came from the Letters of Credit were not disclosed.
In fact, the audit also disclosed that the company carried out no genuine business transactions since 92% of total sales (ie. about Rs 26,143 crore), were made to four parties of the same owner and group ie, Bunge Group, and all the LCs were issued only to two parties.