Loan fraud: CBI conducts probe against firm for causing loss of ₹12 crore to bank

The complainant, the bank’s Deputy Legal Advisor in Mumbai, alleged that the firm had also disposed of hypothecated plants and machinery without its consent, a CBI source said

Mumbai: The Central Bureau of Investigation (CBI) has initiated a probe against an Indore-based machinery company for allegedly causing a loss of around ₹12 crore to the SIDBI (Small Industries Development Bank of India) after the firm’s loan account turned into a Non-Performing Asset (NPA) in June 2013.

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The complainant, the bank’s Deputy Legal Advisor in Mumbai, alleged that the firm had also disposed of hypothecated plants and machinery without its consent, a CBI source said.

“An investigation was begun after registering a case against an accused firm and its two directors under relevant sections of the Indian Penal Code and the Prevention of Corruption Act. It was alleged that the accused firm had, as part of a criminal conspiracy, committed the offences of cheating, criminal breach of trust and criminal misconduct by disposing of the hypothecated plant and machinery without the bank’s consent,” the source said. The accused firm makes iron castings for original equipment manufacturers.

The bank told the CBI that the total dues, including the principal amount, interest and other charges, were at ₹12.12 crore, as of February 2023, while the loan account was reported as fraudulent to the Reserve Bank of India in April 2018.

“In 2011, the accused firm had embarked upon a ₹10.4-crore expansion project, while expecting high-value orders from Indian Railways, as per the requirements of the Research, Designs and Standards Organisation,” the CBI source said.

“The project was funded by term loans of ₹3.75 crore from the SIDBI for purchase of machinery as part of the expansion project,” the CBI source said. Later, however, when the loan account turned into an NPA, the bank had taken symbolic possession of the accused firm’s manufacturing unit along with another bank.

The bank undertook a visit to the unit afterwards for verification of assets, in March 2018. “It was found that the entire factory building/shed had been razed to the ground and no machinery was available on the said site, according to the bank’s complaint to us,” the CBI source said. The bank suspected that the factory premises of the borrowing company had continued to be in its physical possession and it had allegedly disposed of the hypothecated machinery, CBI sources added.