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Accused Canara officials flouted bank manuals: CBI chargesheet on Winsome Diamonds case

The CBI has said that Mehta along with others purchased gold from bullion banks abroad such as the Bank of Nova Scotia, Standard Bank, and Standard Chartered bank against the Standby Letters of Credit issued by Indian banks.

Winsome diverted $750 million to promoter’s firms abroad: Probe Head office of Winsome Diamonds at Opera House in Mumbai. (Express Photo/Vasant Prabhu/File)

The CBI has claimed that accused Canara Bank officials aided Forever Precious Jewellery and Diamonds, a subsidiary of Winsome Diamonds and Jewellery Ltd, the country’s second largest wilful defaulter, by flouting various circulars and manuals prescribed by the bank.

The CBI has said in its chargesheet filed against some Canara Bank officials and others including promoter of the company, Jatin Mehta, his wife Sonia and son Suraj that though the company projected more than 60 per cent growth rate during the period when the jewellery sector was under severe recession, the accused bankers did not collect information to cross check the claims.

Also read | Winsome diverted $750 million to promoter’s firms abroad: Probe

The CBI has claimed that as per a circular issued by the Reserve Bank of India, while any large or abnormal increase in volume of business of the importer should be closely examined, no such checks were conducted. “The manufacturing cycle of the accused company was being assessed as 90 days whereas exports were happening within 4 to 5 days from the date of import of gold from bullion banks, thus aiding the accused company in round tripping. No inspection was conducted by the accused bankers to understand the manufacturing cycle,” the CBI has said in its chargesheet.

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It has further said that bank officers took collateral security from the company between 1.7 per cent to 2.5 per cent, which it claimed was meagre in comparison to the risk to the bank. “No buyer-limit for the UAE buyers was given by accused bankers which resulted in thousands of crores worth of exports being made to the same buyer,” the CBI has said. Alleging that the bankers did not take any corporate guarantee from Winsome Diamonds, the CBI claims that the bank was put to heavy risk causing wrongful loss of Rs 146.35 crore. At least 15 former and present Canara Bank officials are named as accused in the case so far.

Also read | Winsome owner exploited holes in law to use Indian passport: Probe

The CBI has said that Mehta siphoned gold purchased as guarantee of Canara Bank in the garb of exports to United Arab Emirates-based buyers. While credit facilities were taken from Canara Bank for up to 270 days, the cycle of import of gold from bullion banks and its export to UAE was taking hardly 5-6 days, giving undue working capital limits without doing actual business in order to round trip funds and show high turnover.

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Explaining the alleged modus operandi, the CBI has said that Mehta along with others purchased gold from bullion banks abroad such as the Bank of Nova Scotia, Standard Bank, and Standard Chartered bank against the Standby Letters of Credit issued by Indian banks. The Canara Bank sanctioned fund based working capital limit and non-fund based limit to Forever Diamond in 2012 and later this gold was processed and sent to 13 buyers in UAE, again controlled by Mehta and other accused.

The CBI claims that Mehta was authorised to act on behalf of the company to sign and execute documents for procurement of gold from banks under gold loan facility from Indian banks. Through his employees, Mehta started to import raw gold from bullion banks and from private entities to factories situated at SEZ Chennai and SEZ Cochin and subsequently converted this raw gold into other forms such as coins, pendants of almost the same purity and exported these to his shell companies in the UAE. Jatin and Sonia immediately sold the gold items in the open market to one UAE based refinery named Emirates Gold DMCC and realised payments. “The accused did not undertake any manufacturing work for value addition in imported cut and polished diamonds but was merely reassorting and exporting the same diamonds and fraudulently showing higher value,” the CBI has claimed.

Declared a ‘wilful defaulter’ in 2016, Winsome Diamonds, has however claimed that it had not diverted funds but was a victim of non-payment by the firms of his associate Haytham Obeidah, a Jordan national, also named as accused in the case. Mehta and his wife gave up Indian citizenship in 2013-14 and became citizens of Saint Kitts and Nevis, a dual-island Caribbean nation.

‘No cross checks’

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* The CBI has said in its chargesheet that though the company projected more than 60 per cent growth rate during the period when the jewellery sector was under severe recession, the accused bankers did not collect information to cross check the claims

* The investigating agency has claimed that as per a circular by the RBI, while any large or abnormal increase in volume of business of the importer should be closely examined, no such checks were conducted

* CBI claims that the bank was put to heavy risk causing wrongful loss of `146.35 cr.

* 15 former and present officials accused so far

First published on: 26-08-2018 at 00:48 IST
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