CBI books printing firm for ₹464 crore bank loan fraud

Mumbai: The Central Bureau of Investigation (CBI) has registered an offence against a Mumbai-based firm for allegedly causing losses to the tune of over ₹464 crore to a consortium of nine banks through a multi-pronged fraud over the course of five years

Mumbai: The Central Bureau of Investigation (CBI) has registered an offence against a Mumbai-based firm for allegedly causing losses to the tune of over ₹464 crore to a consortium of nine banks through a multi-pronged fraud over the course of five years.

HT Image

According to CBI officers, the FIR was registered against Max Flex and Imaging Systems Ltd and its directors Nimesh Shah, Hitesh Jobalia and Dipti Jobalia. The company, which deals in the printing press and paper, has its registered office at Balasaheb Madhurkar Marg, in Prabhadevi, while the directors reside in Napean Sea Road. All the accused have been booked for cheating under the relevant sections of the Indian Penal Code (IPC), along with relevant sections of the Prevention of Corruption Act.

CBI officials said that the complaint was received in 2020 from the State Bank of India (SBI), which was heading the consortium, stating that the accused company had availed of credit facilities from the banks under a consortium lending agreement and, through fudging of its accounts and inventory books, caused losses to the tune of ₹464.41 crore.

“The fraud has taken place through fudging of books of accounts with a disproportionate increase in debtors and inventories and substantial writing off, syphoning off of funds to related parties and diversion of funds to entities related to directors and employees to defraud the banks and make unlawful gains at the cost of the bank’s funds,” said a CBI officer.

Investigation so far revealed that the company’s account was declared as a Non-Performing Asset (NPA) in 2011 and transferred to the SBI’s Stressed Assets Management branch and a consortium lending facility was extended to it. However, when the company continued to default on its debts, a claim was filed before the Debt Recovery Tribunal in 2017 and a forensic audit of its finances as well as stock and receivables was sanctioned.

“The audit found several irregularities in the company’s books, which were flagged in their reports. The stocks and receivables audit found that the company wrote off stock worth ₹78.01 crore claiming damage, pilferage and a variety of other reasons, while also writing off ₹39.47 crore as bad debts. Further, almost 50% of the money received by the company was credited to accounts held in banks other than the consortium to hide the income, amounting to ₹354.29 crore. It was also found that goods were sold and payments were received in cash, but the goods were still shown as unsold in the inventory,” the officer said.

The officer added that the audit also unearthed ten companies to which funds were diverted from 2011 to 2016, of which four were connected to the directors of the company, while six were connected to its employees.

The overall damage caused to the nine banks came up to ₹464.41 crore and based on this assessment, the SBI approached the CBI in 2020. In its complaint letter, the SBI detailed its findings and also attached the findings of the audits. The CBI, accordingly, booked the accused on November 7 this year and has started an investigation into the matter.