ROTOMAC FRAUD CASE

FAS D2
 INTRODUCTION

 In 1973, the famous Indian brand, Pan Parag was established by Mansukhbhai Kothari
 His two sons Deepak and Vikram Kothari, separated and split business in 1999
 Deepak Kothari got the business of Pan Parag and Vikram Kothari got Rotomac Pens Pvt Ltd
 After the rechristening into Rotomac Global Pvt Ltd,V. Kothari got into real estate, entertainment and
wholesale of food and fragrances
 Rotomac fraud is related to the wholesale food business of Rotomac
 ROTOMAC FRAUD CASE

 Since 2008,V. Kothari took loans from consortium of seven PSU banks on basis of letter of credit
 He said he needed loans to pay suppliers abroad
 Rotomac gave the incomplete, photocopies and forged papers for import-export to banks saying the
original copies are with his clients
 Later, banks found out he was running import-export business through shell companies
 He misused packing credit facility for export of wheat for round tripping of funds
ROTOMAC FRAUD CASE
 MODUS OPERANDI

Bargadia Brothers India Pvt Ltd.

Returns
Bargadia Brothers (Singapore).
Returns
Investment
 MODUS OPERANDI

Rotomac Global Pvt Ltd.

Shell Shell
Co.4 Co.1

Shell Shell
Co.3 Co.2
 HOW ROTOMAC WAS CAUGHT

 IT department conducted several raids in 2014 for tax evasion of Rs106 crore leading to detection of
alleged income
 Bank of India declared V. Kothari as NPA in 2016 and provided 100% provisioning for it
 Bank of Baroda declared V. Kothari as wilful defaulter in 2017 and filed complaint with CBI
 When bank officials visited Rotomac’s buyers and suppliers abroad, they found that the business was
running through shell companies
 CBI filed chargesheet against Rotomac, then AGM of BoB SK Upadhyay, then Senior Manager of the
bank Om Prakash Kapoor and then bank manager Shashi Bishwas, in Feb 2018
 REGULATIONS NOT COMPLIED WITH

 Misuse of packing credit facility for diversion of funds, criminal breach of trust and violation of FEMA
guidelines for pre-shipment credit
 Incomplete, forged and photocopy of bills of lading and other documents
 Missing packing list, insurance copy, certificate of origin, inspection certificate and HSN code for goods
 PMLA, 2002 – various sections including 3, 13(2), 5, 9
 Prevention of Corruption Act, section 13(2) and 13(1)(d)
 OUTCOME OF INVESTIGATION

 Banks initiated recovery process through SARFAESI Act, but later moved to IBC process after its
introduction in 2016
 Case was filed in NCLT Allahabad in 2017
 The ED attached assets worth Rs 177 crore for money laundering
 Vikram and Rahul Kothari are currently under judicial custody
 IT department attached four immovable properties of the Rotomac group in Kanpur and Allahabad
 NCLT ordered liquidation of two companies Rotomac Global and Exports through RP Anil Goel in
Mar 2018
 NEW REGULATIONS INTRODUCED

 Amendments to PMLA 2002

 Amendment in the proceeds of crime to attach property held outside the country and not confined to the
property held in India
 Uniformity of bail conditions in all offences committed as per sec 45(1) instead of only those offences which have
been scheduled for a period of 3 years or more
 Corporate frauds included under scheduled offences of PMLA to facilitate ease of action by Registrar of
Companies to report cases to the ED
 To enhance the effectiveness of investigations undertaken by the enforcement directorate, amendment in the act
gives enforcement directorate an additional 90 days to undertake detailed investigations
 Sec 66(2) has been incorporated to enhance better effectiveness efficiency and coordination amongst the
investigation agencies to curb black money
 SARFAESI Act amendment stating the inclusion of provision of 3 months imprisonment if the borrower does not
provide asset details to the lender to get possession of the mortgaged property in 30 days
 REFERENCES

 http://cbi.gov.in/firs/2018/2018_pdf/2018_bsnfc_delhi_firs/RC0742018E0001.pdf
 https://www.news18.com/news/business/rotomac-pens-md-vikram-kothari-arrested-for-rs-800-crore-loan-default-
1665045.html
 https://timesofindia.indiatimes.com/business/india-business/rotomac-pens-promoter-vikram-kothari-son-arrested-
by-cbi/articleshow/63032568.cms
 https://www.livemint.com/Industry/NMukOejfHXhYYq5g801k4I/Rotomac-bank-fraud-Bank-of-Baroda-has-
exposure-of-Rs4566-c.html