CBI books dairy maker Kwality Ltd, directors over Rs 1,400-cr bank fraud; conducts raids

The CBI has booked dairy major Kwality Ltd and its directors for allegedly cheating a consortium of 10 banks, led by the Bank of India, of over Rs 1,400 crore through bloating of financial statements and diversion of loan funds, officials said Monday.

Nearly 11 days after registering an FIR in the case, the CBI conducted searches on Monday at eight locations in multiple cities including Delhi, Saharanpur, Bulandshahr (Uttar Pradesh), Ajmer (Rajasthan), Palwal (Haryana) on the premises of the company and its directors.

The CBI has registered the case against Kwality Ltd. -- which started as an ice-cream manufacturing company and diversified into milk-based products -- and its directors Sanjay Dhingra, Siddhant Gupta, Arun Srivastava besides other unidentified persons, the officials said.

The agency has acted on a complaint by the Bank of India.

"It was alleged in the complaint that the said accused had cheated the Bank of India-led consortium comprising BOI (lead bank), Canara Bank, Bank of Baroda, Andhra Bank, Corporation Bank, IDBI, Central Bank of India, Dhanlaxmi Bank, Syndicate Bank to the tune of Rs.1400.62 core (approx.)," CBI spokesperson RK Gaur said.

They allegedly cheated the banks by way of “diversion of bank funds, sham transactions with related parties, fabricated documents/receipts, falsified books of accounts” and created false assets and liabilities etc, Gaur said.

In its complaint, the Bank of India, the lead member of 10-bank consortium, has alleged that the company manipulated its financial statements by bloating its business operations through overstatement of the sales. purchases, debtors. creditors and inventories to keep the fund flow from bank going.

The bank conducted a forensic audit of the company after it failed to repay loans.

"Out of the total sale of Rs.13,147.25 crore made by the company only Rs.7,017.23 crore was routed through the consortium accounts," the BOI has alleged.

It said a considerable amount of trading, sales and purchases were made "without actual receipts of the same in factory premises and physical deliveries therefrom".

"Supplies have been effected directly by the suppliers of the Company to the customers of the Company. These items being exempt from taxes, they are also not covered under VAT and GST regime.

“These suppliers and customers appear unorganised in nature and appear to have a weak financial base to support such large volumes of business," the bank has alleged in its complaint which is now a part of the FIR.

The bank has alleged that a considerable amount of sales and purchases was settled without actual payments being received or made by the companies.

"Balance Confirmations in respect of receivables show huge deviations. Against total outstanding of Rs 1,807.57 crore parties have confirmed receivables of Rs 972.82 crore. Accordingly, it indicates inflation of receivables by Rs 834.75 crore," it alleged.

The bank has alleged that the accused directors acted dishonestly with the aid, consent and active connivance of each other, carried out the misappropriation and dishonest conversion of funds for their personal gains.

"The accused persons have given the shape and effect to the forgeries and fabrication as a result of which window dressing and cheating of Bank has been carried out,” it alleged.

“By their acts of misappropriation, cheating and frauds. the money entrusted to the accused persons for the permitted business purpose have been utilized for their own benefit causing wrongful loss to the Bank of India Consortium," it alleged.