Ethics and Corporate Governance

Team Members
Geetanjali Pathak – 90
Harshwardhan Palav- 94
Jay Yadav – 172
Varun Gupta -183
Vijay Sharma -185
Introduction to-Rotomac
• Rotomac was established in 1992 by Deepak Kothari and Vikran Kothari,
sons of Mansukh Kothari, owner of Pan Parag.
• Rotomac Global Private Limited manufactured pens and pencils.
The Company offers products such as fine liner pens, gel pens, marker
etc. in 38 countries.
• In 1999, Vikram Kothari became the Chief of Rotomac Pens.
• Over time, Vikram diversified the Rotomac business into Rotomac
Global and ventured into real estate, malls, mouth fresheners, and agro
exports. His export business was said to export rice, wheat, maize, gold,
etc.
• To expand the stationery and export/import business company started
taking loans from different bank.
• Company also took multiple FLC from banks to imports goods from
foreign countries.
Details of the Scam
• Loans were taken to procure goods and export agro products. But no
export orders were executed.
• Loan money was diverted into related offshore accounts.
• Rotomac never repaid the interest and principal amounts.
• It’s not just the companies’ internal governance mechanisms that
failed; auditors, regulators, banks, and institutional investors also
failed in their respective roles.
• Hampered the Corporate Governance Pillars-
Accountability, Fairness, Transparency, Independence.
Timeline
2017 -The company
reportedly begins defaulting
1984 Rotomac Global Private March 2018 company and
on loan repayments to January 2019 Vikram
Limited is founded by Vikram directors charged with
multiple banks. Defaulted Kothari released on bail.
Kothari in India. multiple cases of fraud.
loans allegedly exceeding Rs.
3,700 crores .

September 2020 Company's

1990-2000 significant growth
February 2018 Vikram In August 2018 Company was Founder Vikram Kothari and
and establishes itself as a
Kothari and his son were declared Bankrupt, and Assets his son Rahul Kothari
major player in the Indian pen
arrested by CBI. were seized and sold. convicted under Sections were
industry.
420 and 406 of IPC.

Sections were 420 and 406 of IPC.

Section 420 of the Indian Penal Code (IPC) is a law that makes cheating a crime. Cheating is when someone tricks or deceives another person
to make them give away something valuable, like money or property. If someone is found guilty of cheating, they can be punished with a
prison sentence that could be as long as 7 years, and they may also have to pay a fine.
Section 406 of the Indian Penal Code (IPC) is a law that makes it a crime to take something that has been entrusted to you and use it for your
own benefit, without permission. This is called "criminal breach of trust."
 Lack of proper governance and oversight in the
Rotomac case are not entirely clear, but it is believed
that a combination of factors contributed to the
situation:

Governance • Weak internal controls and risk

Lapses management systems within the banks
• Lack of proper due diligence
• Corruption and collusion
• Political pressure
• Lack of proper regulations
 Impact & Stakeholders
• Collective callousness and mismanagement has caused great loss to public
exchequer and public money.
• RBI’s own Financial Stability Report, released on 30 December 2013, had
warned that “Failure of a major corporate or a major corporate group
could trigger a contagion in the banking system due to exposures of a large
number of banks to such corporates.”
• The scams have collectively caused an effect on the whole banking
system.
• 2018-Rotomac Exports and Rotomac Global, firms- auctioned by the
bankruptcy court with no resolution plan in sight.
• 2023-Around 1,000 employees used to work in the factory. But in the last
two years, the company removed half of them. The directors used to say
there was a financial crisis and they would recover soon, said an employee.
But the factory is shut down now.
• This causes a slowdown in economic growth often leading to weakening
of the economy and often disappearance foreign investment. This run-
away causes foreign portfolio investors to look for other viable options to
invest and nurture their money in a place or economy they see more trustful.

This Photo by Unknown author is licensed under CC BY-NC-ND.

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