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THE STERLING BIOTECH FRAUD

Akhilesh Bhargava

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Sandesaras

The fugitive Sandesaras, the dubious promoters of the Sterling Biotech Group, which has duped banks of over Rs.8100 crores (it could be much more), and who have run away to Nigeria, which has no extradition treaty with India, where they have established a huge asset base, built by looting banks in India, has had companies and offices at British Virgin Islands, Liechenstein, Seychelles, Dubai and China and whose overseas assets have included oil rigs, offshore oil blocks and infrastructure for oil evacuation and transportation; yet in India, the company addresses of this asset loaded multinational group, were located in a chawl, a slum, in vacant buildings, as also in buildings that did not exist at all. And none of the lending banks either verified it, or if they were aware, they raised no alarm whatsoever. It is from these fake offices that the Group ran a ‘flourishing’ business, that convinced bankers to lend them thousands of crores of rupees. These bogus addresses/offices were the key element in their modus operandi to cheat banks and finally run away from India so easily, since a bogus address means that the person cannot be found at the given address.

The Enforcement Directorate has investigated this banking fraud, and has found the modus operandi to be not complex, but rather simple and it yet went undetected for many years. It says that the Sandesaras would apply for loans from banks on the basis of manipulated figures, they would incorporate shell companies in India and abroad, by indulging in bogus circular trading which was merely on paper between these shell group companies, they would show huge turnover and profits, but would pay no taxes by claiming depreciation write-offs in fake investments in plant and machinery etc. and would thereafter siphon away the bank loans into personal assets including real estate, high end cars etc. They eventually managed to siphon away such money abroad, before the entire family scooted away. Interestingly, despite the running away from India, of the likes of Vijay Mallya and Nirav Modi, after committing huge bank frauds, no authority was on any alert and the Sandesaras easily managed to flee from India, just a couple of months ago.

Such kind of blatant frauds and the easy escape of the fraudsters, is not possible unless the entire system colludes with them. The Sandesars fraud saga has involved top bureaucrats, bankers and politicians, without whose support such a blatant fraud was just not possible. In an income tax raid conducted on the Sterling Biotech Group a few years ago, direct incriminating evidence was found of not just huge bribe payoffs to top ranking bureaucrats, but also of the investment of many babus/netas in their Group Companies. And despite that all of them have gone scot free, which explains the ease with which the Sandesaras ran away from India. The sad irony is that in such cases, it is the system that protects the fraudster and eases his exit from India, because if such a fraudsters sang like a bird, the entire system would be shaken up, and the big fishes would be caught in the net.

Business Tit-Bits

The Burden of Infrastructure NPAs

Akhilesh Bhargava

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As the country is the midst of an NPA crisis, we find that resolution are hard to come by. The only resolutions are from the Steel and Metal sector. The sector which forms the crux of the NPA crisis in India is the Infrastructure sector which accounts for roughly 25% of total NPAs. Infact, so serious are the NPAs in this sector that 1/4th of loans given turn bad and total around 2.5 lakh crore Rs. Loans given in the period 2009 to 2012 were found to be the worst. Infrastructure loans include loans given for construction of roads, bridges, highways, ports and power sector loans. Corruption, government not living up to its end of the deal and banks rushing to give loans without going through boanfides of the firm are the main reasons. The infrastructure sector bad loan problem has turned into a chronic one and no resolution worth talking about has taken place.

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Business Tit-Bits

The Diamond Cheats

Akhilesh Bhargava

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We take a look into the glamorous diamond industry in India, said to be the largest in the world. Being a very close-knit one in terms of belonging to a particular community and often only within family members, the scope for manipulation becomes easy. The diamond industry has become tainted with bogus exports, money laundering practices, massive NPAs, round-tripping of money etc. Names such as Jatin Mehta, Mehul Chokshi and Nirav Modi have become synonymous with the industry and hence banks are now restricting their exposure to the sector and implementing tougher conditions for lending money to the beleaguered diamond traders.

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Business Tit-Bits

Why Mr. Jaitley should stop the reckless tax prosecution?

Akhilesh Bhargava

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As many industry and tax associations approach the Revenue Secretary for help to prevent income tax authorities from unfairly harrasing and prosecuting them for minor discrepencies, we ask Mr. Arun Jaitley why is this being done. This culture of “prosecution raj” is hurting small and big businesses alike and is sending the wrong message to India Inc. Giving arbitary powers and setting not only revenue, but also prosecution targets for income tax officers is unfair and businessman are bearing the brunt of this. In addition to penalty and interest, other prosecution punishment is being handed down for the most minor of offences which is leaving a bad taste in the mouth of industry at large.

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