The Enforcement Directorate (ED) has approached the National Company Law Tribunal (NCLT) to stop liquidation of country’s second largest wilful defaulter Winsome Diamonds and Jewellery Ltd, till it completes its investigation against the diamond firm under the Prevention of Money Laundering Act (PMLA).
Winsome Diamonds promoted by Jatin Mehta and its subsidiaries owe nearly Rs 10,000 crore including interest to a consortium of 15 banks led by Standard Chartered and Punjab National Bank. The company also figures in the list of top 10 bank loan defaulters that former Reserve Bank of India Governor Raghuram Rajan sent to Prime Minister’s Office (PMO) in 2015 seeking “concerted” action.
The ED wants the liquidation to be halted as it is in the midst of establishing the money trail that led to an alleged loan fraud of $1.26 billion (around Rs 8,800 crore) by the company in 2013.
The ED has so far attached assets worth Rs 220 crore of Winsome Diamonds under PMLA as proceeds of crime and has found that the company allegedly diverted at least $750 million (Rs 5,175 crore) to six entitites in Hong Kong, Bahamas and UAE, directly or indirectly controlled by its promoter Jatin Mehta, through a web of ‘dummy companies’,
Winsome Diamonds and Mehta, who became a citizen of a popular tax haven — St Kitts and Nevis, in 2013, are currently being investigated by the CBI, Serious Fraud Investigation Office (SFIO), Income Tax and ED in connection with the bank fraud, criminal conspiracy and tax evasion. Both the CBI and ED have written to Interpol to issue a Red Notice against Mehta but the global agency is yet to issue the notice.
The creditors of Winsome, mainly banks, want the liquidation of the company to begin even as they are staring at a haircut of 98 per cent since the diamond firm has assets of only about Rs 200 crore in its balance sheet that can be liquidated. The creditors fear that these assets may lose value with time said a lawyer familiar with the case.
While ED’s plea to halt Winsome’s liquidation will come up for hearing on July 10, the company law tribunal has asked the resolution professional of Winsome Diamonds and the suspended board of the company to file their response to ED’s application in court.
Emails to Winsome Diamonds and Jatin Mehta did not elicit any response.
Winsome Diamonds and its subsidiaries were taken to NCLT in February 2018 and its resolution process has failed as no bidder has emerged. The CBI has alleged that 13 UAE-based companies controlled by Mehta and a Jordanian national — Haytham Salman Abu Ali Obaidah have defaulted on payments of $1.26 billion to Winsome, which had led to the latter’s loan default.
On June 28, 2018, the CBI filed its chargesheet against Winsome, Mehta and 21 others, including senior public sector bank officials. In July, the ED filed a separate prosecution complaint (chargesheet) in the Winsome case. Winsome Diamonds, which was classified as a “wilful defaulter” in October 2013, has claimed that it did not divert funds and was a victim of non-payment by Obaidah’s firms.
The company has claimed that Obaidah and his associate firms suffered losses of about $1 billion in derivatives and commodity trading and were unable to pay their dues to Winsome.
Last week, the CBI registered two fresh cases of bank loan fraud of Rs 700 crore against Winsome and Mehta. It also searched the offices of the company across the country.