Special court permits CBI to approach foreign governments to probe ₹725 crore fraud

On February 24, 2012, the CBI registered a case against 20 Mumbai-based companies, their directors and officials of State Trading Corporation (STC), a central government undertaking, for allegedly cheating STC of ₹725 crores

Mumbai: The special CBI court recently permitted the central agency officials to approach authorities in London and Northern Ireland to unearth a ₹725-crore fraud, which was busted in 2012. The CBI has sought assistance from the respective governments to investigate the transactions made by the accused companies with UK buyers.

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On February 24, 2012, the CBI registered a case against 20 Mumbai-based companies, their directors and officials of State Trading Corporation (STC), a central government undertaking, for allegedly cheating STC of ₹725 crores.

As per CBI, during 2005-06, STC in Mumbai introduced a scheme for the export of various items under the Credit Linked Insurance Scheme and subsequently entered into an agreement with EXIM Bank for post-shipment finance. The agency alleged that the accused companies entered into a conspiracy to misuse the scheme.

The agency claimed, in pursuance with the criminal conspiracy, the STC had signed a Memorandum of Agreement (MOA) with each of the above associates to procure gold jewellery, diamonds and other items and arrange for the exports to identified UK buyers from the list approved by insurance companies.

As per the condition of the agreement, the export documents, including the bill of exchange, submitted by the associates were sent by STC by fax to the foreign buyers in the UK for its acceptance and in turn they returned the same by fax with remarks “accepted the documents” which was routed through banks of the foreign buyers.

The foreign buyers in the UK were required to sign the same in the presence of their bankers. The bankers of buyers were required to return the said bill of exchange and other export documents signed by UK buyers on the basis of such acceptance, the EXIM Bank released 90% of the amount of the total export value. Subsequently, STC released 83.5% of the amount after deducting their charges and disbursed to the above said associates in their nominated bank accounts.

The agency claimed that eight associate exporters in connivance with the officials of STC made exports of various goods under Credit Linked Insurance Scheme on credit facility from STC, Mumbai, but no export proceeds were received by STC. The officials of STC did not take efforts to recover the said amount from these companies, claiming with insurance companies or encashing the post-dated cheques which accumulated huge outstanding overdue from overseas buyers. Despite the continuous default, the accused officials of STC continued business with associates without taking any action for recovery.

Eleven years after the crime was registered, the CBI approached the special court for permission to seek assistance from the London and Northern Ireland governments where the overseas buyers were located to seek details of the transactions. The court has now sent a letter of request to the competent authorities of the two governments to carry out the investigation regarding the transactions done through STC and forward the evidence before the special court.