The Central Bureau of Investigation (CBI) has registered a case against GTL Ltd, some unknown bankers and directors for allegedly defrauding a consortium of banks for an amount to the tune of Rs 4,760 crore by creating an array of shell firms to divert bank money.
As per the central probe agency, the company fraudulently obtained loans from a bank consortium of around 24 lenders and subsequently siphoned off majority of the loan amount in conspiracy with vendors and some bank officials.
Enquiries revealed that GTL was extending advances to vendors year on year without supply of material and goods. And eventually these advances were provisioned, the agency said. Moneycontrol has reviewed the copy of the First Information Report (FIR).
To facilitate the fraud, the perpetrators allegedly created various vendor companies in connivance with GTL Ltd, the CBI said. Among the banks, ICICI Bank has an exposure of Rs 650 crore to GTL Ltd, Bank of India Rs 467 crore and Canara Bank has Rs 412 crore.
The company obtained short term loan amounts for certain business activities by misrepresentation that all such loan amount will be utilised for the purpose of the said purpose. But soon after disbursement, majority of the loan amount was not utilised for the purpose for which it was granted, the CBI said.
“Thus, M/s. GTL Limited cheated the lenders and thereafter misappropriated the funds of the lenders,’ the agency said in its first information report.
Started in 1987 by Manoj Tirodkar of Global group, GTL is engaged in the business of providing telecom network deployment services, operations and maintenance services to telecom operators in India and international markets.
How the fraud was perpetrated
According to the probe agency, the GTL fraud happened in the following manner.
To begin with, huge advances were given to the purported vendors and substantial amount of such advance payments were routed back to GTL Ltd by the vendor entities after appropriating for purported marginal supply by the vendors.
Secondly, working capital funds were also used by GTL for buying fixed assets from vendors. The company allegedly made investments in various companies in purchasing their shares, the CBI said.
The lenders have disbursed Rs 1,055 crore and Rs 1,970 crore in financial year 2009-10 and 2010-11, respectively. Out of this loan amount, Rs 649 crore was invested in short-term mutual funds in FY 2009-10 and Rs 1,095 crore in FY 2010-11 immediately upon disbursement, CBI said.
Further Rs 135 crore were invested in fixed deposits immediately upon disbursement in FY 2010-11. “The company has availed sale bill discounting of Rs 3,01,08 crore (Fy 2009-10) and Rs 5,06,27 crore (FY 2010-11), out of which substantial amount has been invested in Liquid Mutual fund,” the CBI said in its FIR.
Huge advances given to vendor firms
CBI investigation revealed that an amount of Rs 1,21,397 crore is outstanding against the following four vendors - namely Acuity Trading Pvt Ltd, Lenity Trading Pvt ltd, Venerate Trading Pvt Ltd and Vinamara Multitrading Pvt Ltd.
GTL extended an advance of Rs 741.37 crore for supply of material to Acuity Trading Pvt Ltd, Rs 763. 59 crore to Lenity Trading Pvt Ltd, Rs 868.35 crore to Venerate Trading Pvt Ltd and Rs 816.04 crore to Vinamara Multitrading Pvt Ltd from financial year 2009-10 to 2011-12.
And against these huge advances, these four vendors supplied material of Rs. 109.74 crore, Rs 101. 09 crore, Rs 70.2 crore and Rs 103.44 crore, respectively. "Eventually, Rs 1,213.97 crore was left outstanding towards these four vendors which was gradually provisioned till 2017 - 18," the CBI said.
According to investigators, these advances were given to vendors despite their meager net worth and their recent incorporation. The enquiry further revealed that all these vendor companies were incorporated within a short span of less than three months.
"And the Memorandum of Association (MoA) of these vendors of GTL Limited is exactly same. There are same corrections in all the MoA's which clearly establishes that all the MoA's have been drafted by the same agency/ source," the CBI said.
Further, advances were given by GTL to vendors to the tune of Rs 2,113.76 crore in financial year 2009-10 against which material received was only of Rs 65.33 crore, the CBI said.
Despite the non-receipt of goods against advances given, again in
financial year 2010-11, GRTL advanced another Rs 4,438.20 crore to the same set 0f entities against which material received was only of Rs 708.70 crore.
Again, advances of Rs 256.16 crore were given in financial year 2011-12 and nothing was received against this advance. "Therefore, the enquiries have established that these vendor companies were not supplying the goods commensurate with the advances given and despite that these were further receiving advances from GTL Limited year after year," the CBI said.
RBI red flag ignored?
The Reserve Bank of India (RBI), in its letter dated April 1, 2016 advised lDBI Bank, one of the lenders to GTL, to red flag GTL and initiate forensic audit. But two months later, lDBl Bank responded on behalf of the consortium saying not to classify the account as red flag and also not to appoint a forensic auditor as it may delay the dues settlement, the CBI FIR shows.
Enquiry further revealed that RBI in its letter dated 15 July, 2016 again directed IDBl Bank to comply with the directions of its earlier letter. Accordingly NBS and Co., Chartered Accountant was appointed
to conduct the forensic audit of GTL Ltd.
IDBI Bank could not be immediately reached for comments for this story.
The audit revealed major irregularities including 'much lesser' purchases from vendors against the higher advance amounts extended. Essentially, a sizeable portion of the advance money was routed back to GTL by vendor firms amounting to fraud, the CBI said.