Pramod Kumar Mittal, a former Chairman of Global Steel Holdings Limited, has been booked by the CBI for alleged default on credit re-payments to the State Trading Corporation causing an estimated loss of Rs 2,112 crore to it.
CBI in its 19-page FIR has also named Lalit Sehgal, the then Chief Executive Officer of Global Steel Philippines Inc and 18 other accused including the then Chairman-cum-Managing Director of the STC Arvind Padalai and 18 former honchos of the PSU.
The company Global Steel Holdings Limited, which was set up in tax haven Isle of Man and Global Steel Philippines Inc, has also been named as accused in the FIR which is registered for charges of criminal conspiracy, cheating and corruption.
No reaction was immediately available from Mittal or any of the companies mentioned in the FIR.
It is alleged that GSHL had approached STC in 2003 seeking assistance in financing facility by issuing Letters of Credit for purchasing raw materials required for their newly acquired steel plants in the Philippines and Bosnia.
The STC sent a communication to Indian Ambassador in the Philippines seeking feedback about the constitution of the company, strength of assets, investment climate to which he responded that the embassy was not in a position to provide such details and advised to carry out further inquiries to protect its interests, the FIR alleged.
The STC guidelines mandated to get a credit rating done in such cases from specialised agencies but no report regarding financial health of the company and associates was obtained despite the suggestion of the Ambassador, it alleged.
"From the initial stage, STC was exposed to financial risk and undue favour was shown to the Associate by them," it said.
The FIR alleged Pandalai, the then Chairman STC, asked his officials to place the GSHL proposal before the board.
The officials did not apprise the board that RBI guidelines barred suppliers' or buyers' credit for merchanting or intermediate trade transactions, it alleged.
The board had given 'in-principle' approval to third country transactions along authorised the CMD to exercise all powers for smooth implementation of the project.
Once the agreement was signed, the then Chief General Manager B D Majumdar in "conspiracy" with the company moved for change in the agreed payment system which allowed the company to give more time to it to make payment and also exposed the STC to financial risk, it alleged.
The FIR claimed that in the revised system of payment the company got easy money for longer period to fund its operations with no pressure to repay STC dues.
It also emerged that fresh Letter of Credits were issued to the company despite transactions not being completed in the mandatory six-month period.
The CBI alleged that 80 Letter of Credit were opened by the STC in favour of the suppliers with first one in 2005 and last in 2010.
"The STC officials in conspiracy with GSPI and GSHL representatives opened fresh LCs despite the fact that outstanding amount was increasing every year due to default in payment by GSPI and GSHL," the FIR alleged.
Changes in market conditions and global meltdown, GSPI plant operations in the Philippines were shut down in 2008, it alleged, adding that outstanding against company was Rs 729 crore as on March 31, 2009.
"Ignoring the fact that that outstanding amount was not being paid by GSPI and market was very volatiles, STC officials in conspiracy with GSPI representatives proceeded to make further funding in May 2009 and continues till May, 2010. Thus exposing STC to further financial risk," it alleged.
It alleged that in November 2012, the total outstanding amount against GSPI and GSHL was 371 million USD.
"Pramod Kumar Mittal, Chairman, GSHL and GSPI committed criminal breach of trust as he failed to make payment to STC as per terms of agreement accepted and signed by them. The cheques given by GSHL and GSPI against the outstanding dues were dishonoured for which the matter is pending before the court," it alleged.
The STC, in its complaint, has alleged it has suffered loss to the tune of Rs 2,112 crore because of the alleged criminal conspiracy, abuse of official position, cheating, fraud, breach of trust and misappropriation of stocks.