Rs 7377 Crore Loan Fraud: The Directorate of Enforcement (ED), through its Lucknow Zonal Office, has provisionally attached 86 parcels of land valued at Rs 31.94 crore as part of an ongoing investigation into the Shri Lakshmi Cotsyn Limited bank fraud case. These properties, spread over 73.34 hectares of agricultural land in Bhatapara and Baloda Bazar, Chhattisgarh, are linked to the fraud under the Prevention of Money Laundering Act (PMLA), 2002. The assets are registered under the names of the company, its trusted employees, and unsuspecting individuals.
Background and Key Figures
The ED began its investigation following an FIR lodged by the Anti-Corruption Branch V (AC-V) of the Central Bureau of Investigation (CBI), New Delhi, based on a written complaint from Shri Rajeev Khurana, Deputy General Manager of the Central Bank of India at the SAM Branch, located at 5, Jeevan Tara Building, Parliament Street, New Delhi. The complaint, dated June 1, 2021, alleges that the executives and affiliates of Shri Lakshmi Cotsyn Ltd. engaged in extensive fraud between 2010 and 2018, involving cheating, criminal conspiracy, forgery, breach of trust, and misappropriation of public funds.
Key Individuals Named in the FIR:
- M/s Shri Lakshmi Cotsyn Limited (registered office: 19/X-1, Krishna Puram, GT Road, Kanpur 208007, Uttar Pradesh)
- Dr. Mata Prasad Agarwal: Chairman and Managing Director
- Pawan Kumar Agarwal: Joint Managing Director
- Devesh Narain Gupta: Deputy Managing Director
- Sharda Agarwal: Director
- Unknown public servants and private individuals
Findings and Financial Misconduct
Shri Lakshmi Cotsyn Ltd. sought financial assistance from a consortium of 23 banks, with the Central Bank of India serving as the consortium leader, for various textile products including blended suiting, shirting, denim, and technical fabrics. However, due to financial irregularities and lack of adherence to financial discipline, the accounts were classified as non-performing assets (NPAs) by the banks.
A forensic audit uncovered significant discrepancies:
- Inflated Inventory Records: The company reportedly exaggerated inventory figures.
- Improper Auction Processes: Auctions were poorly managed and lacked transparency.
- Questionable Discounts: The company provided substantial discounts totaling Rs 207.29 crore to related parties and undisclosed or non-existent customers.
- Unsubstantiated Advances: Advances given to suppliers were written off without supporting documents, indicating a possible misappropriation of funds.
Diversion of Funds
The investigation further revealed that funds from Shri Lakshmi Cotsyn Ltd. were diverted to a subsidiary, Shri Lakshmi Power Ltd., and subsequently transferred to individual accounts through an ICICI Bank account in Baloda Bazar. These diverted funds were then used to acquire land in the names of employees and local tribal residents of Chhattisgarh, often without their full awareness.
Liquidation and Outstanding Loan
Following the directives of the National Company Law Tribunal (NCLT), Shri Lakshmi Cotsyn Ltd. was liquidated, leading to asset sales worth approximately Rs 265.44 crore. However, despite the liquidation efforts, the outstanding loan amount remains at Rs 7,377 crore, which the Reserve Bank of India (RBI) has declared as fraud.
Current Status and Further Action
The ED continues to investigate additional assets and financial trails associated with Shri Lakshmi Cotsyn Ltd. The agency is working to recover funds and hold the company and its affiliates accountable for the alleged financial misconduct and public fund misappropriation. Further updates on the investigation are anticipated as the agency pursues legal actions under the PMLA.
This case serves as a significant development in efforts to address financial fraud and recover public funds in India.
