The Serious Fraud Investigation Office (SFIO) on Thursday arrested Rahul Kothari, director of Rotomac Group along with Frost International’s CEO Sujay Desai and Managing Director Uday Desai for fraudulent round tripping of funds, abusing the scheme of merchanting trade.
Kothari, a whole-time director of the pen company Rotomac, and the Mumbai-based company’s bosses were remanded to SFIO custody by a magistrate court. The investigation revealed that in order to obtain bank funds, Kothari, along with Sujay Desai and Uday Desai, manipulated their financial statements.
“They inter alia issued fictitious debit notes to many foreign entities, which were under their control, in order to fraudulently transfer these foreign exchange losses incurred during the fraudulent merchanting trade to trade receivables,” a senior official said.
Following this modus operandi, they were able to show a healthy balance sheet. The SFIO probe found that Rotomac manipulated books in the form of trade receivables to the tune of Rs 3,000 crore, while the total amount for Frost International was around Rs 3,500 crore.
Rotomac Group of Companies and Frost International have total outstanding liability of Rs 4,000 crore and Rs 3,500 crore towards 14 public sector banks against which they have defaulted.
In May 2018, the Central Bureau of Investigation (CBI) filed its charge sheet against Rotomac Global and its promoters, in connection with the Rs 4.56 billion alleged loan default involving Bank of Baroda (BoB). The investigative agency also booked Frost International for an alleged bank fraud, to the tune of over Rs 3,592 crore.
CBI had alleged that Frost International and its directors submitted forged documents, and diverted and siphoned off the bank’s funds.
Enforcement Directorate (ED) too had registered a separate case against Rotomac under the Prevention of Money Laundering Act.