FINANCIAL FRAUDS IN INDIA

Submitted By: Adarsh Chaudhary (1871401137)

MARCH 18, 2019

 TABLE OF CONTENTS

TOPICS PAGE NO.

Top Financial Frauds in India 2

Literature Review 3-7

Introduction 8-9

Mr Vikram Kothari 10

How the 3400 crore con was penned 11

Talking numbers in the Rotomac Scam 12

Rotomac bank fraud loan wasn’t for Vikram

Kothari’s pen business but for ‘Importing wheat” 13

CBI begins Questioning Vikram Kothari 14

References 15

1|Page
 TOP FINANCIAL FRAUDS IN INDIA

1. 2g Spectrum Scam (2008) – ₹1.76 Trillion

2. Indian Coal Allocation Scam (2012) – ₹1,856 Billion (Us$29 Billion)
3. Bofors Scam (1980s & 90s) – Rs 100 To 200 Crore
4. Wakf Board Land Scam (2012) – ₹2,000 Billion (Us$31 Billion)
5. Commonwealth Games Scam (2010)–70,000 Crore
6. Satyam Scam (2009) – 14,000 Crore
7. Vijay Mallya & Kingfisher Airlines Scam: ₹9,000 Crore (Us$1.4 Billion)
8. The Fodder Scam (1990s) –Rs 9.4 Billion
9. Pnb Scam Or Nirav Modi Fraud- Rs 11,400 Crore
10. Speak Asia Scam – Rs 2276 Crores
11.Shradha Chit Fund Scam – Rs 24.6 Billion
12. Sahara- 24,000 Crore
13.Nsel Scam – Rs 5500 Crore
14. Harshad Mehta Scam
15.Bhansali scam – Rs 1200 crore
16. Cobbler scam - 600 million $
17. ISRO Spectrum Scam
18.Chopper Scam (2013)- Rs3600 Crore
19.Granite Scam (2012)- 16,000 crore
20.Rotomac Scam – Rs 3695 Crore

2|Page
 Literature Review

1. 2G SPECTRUM SCAM: FOCUS ON MEDIA EXPOSÈ, ECONOMIC

REPERCUSSIONS, AND PUBLIC REACTION
Naman Sehgal (Oct- Dec 2016)

In his research he said that there should be awareness in public regarding

whatever deals are made between the corporate houses and the
Government, so that this nexus is not able to misuse taxpayers‟ money.
Though the globalization has enabled the private houses to come and
invest through FDI policy in India, it should be ensured that they are morally
and socially responsible and should be punished heavily if found guilty in
any manner. There should be increased transparency in their working since
the policies that are made for the welfare of the public, do not reach the
public and remain only in their records. Though this is not the case with all
MNCs and private houses, but still a large amount of money is looted by the
public-private partnership.
2. As we have seen in the 2G scam, various politicians and bureaucrats were
involved, they should be penalized in a way that no one else tries to imitate
or repeat such an act. The culprit politician should be debarred from
contesting elections and bureaucrats should be terminated.
3. The Supreme Court‟s judgment on 10 February 2011 urged CBI to go after
the illegal beneficiaries of 2G spectrum allocation even if they were from
billionaires‟ club. Such a verdict should be strictly followed without the
Supreme Court reminding CBI of its duties every time it conducts an
investigation.

http://www.ijrssh.com/images/short_pdf/1477044215_Naman_Sehgal_14.pdf

3|Page
2. Harshad Mehta Scam

Samir K. Barua & Jayanth R. Varma

( Indian Institute of Management Ahmedabad) in 1993

In their research paper they told about the Harshad Mehta scam.
The two Securities Markets The scam was in essence a diversion of funds from the
banking system (in particular the inter-bank market in government securities) to
brokers for financing their operations in the stock market.

The Mechanics of the Scam :-

The three crucial steps were:

1. The settlement process in the government securities market became broker

intermediated, that is, delivery and payments started getting routed through
a broker instead of being made directly between the transacting banks.

2. The broker through whom the payment passed on its way from one bank to
another found a way of crediting the money into his account though the
account payee cheque was drawn in favour of a bank.

3. While the above two steps transformed an RF deal from a loan to a bank into
a loan to a broker, it would still be a secured loan. However, the brokers soon
found a way of persuading the lending bank to dispense with security for the
loan or to accept worthless security

https://faculty.iima.ac.in/~jrvarma/papers/vik18-1.pdf

4|Page
3. Vijay Mallya Scam

Sweety Gupta (7 jan 2017)

In her research paper stated that why kingfisher failed . There were many
reasons behind the failure of Kingfisher.
Lack of strategy :- Mr mallya Kingfisher initially launched all economy class and
later to luxury business class. The services of the airlines passengers: were
appreciated by the travelers as the hospitality and aircraft condition of the
Airlines were above average. But soon, the airlines shifted to low-cost air
traveling, frequent changes made travelers lose interest in the airlines. In addition
to that, they didn't focused on highly profitable routes in domestic area.

Lack of delegation : Mr. Mallya was too involved in the business and unlike his
other two major businesses - the spirits and beer segments were running
smoothly under the managing this airline had no long term CEO or MD

Recession :- It was not only the poor policies of the management of Kingfisher
that led to its collapse. One of the major reasons that contributed to the collapse
was Recession that hit the the world in 2008. Recession affected the whole world
and had an indirect impact on the air travel occupancy in these factors had a
negative impact on the health of Kingfisher and soon saw its downfall

High Operational Cost are very high compared to other industries. Airline
companies requires for the routes, investment in the aircraft maintenance,
salaries employees (which are generally on high end), airport charges, huge taxes
to the government. Above all, The cost of fuel was very high and as such
Kingfisher find it difficult to recover those losses there is lot of competition
between airline companies, all these high operational costs without good profit
margin caused the Kingfisher to downfall
http://www.pbr.co.in/2017/2017_month/Jan/22.pdf

5|Page
4. Coal is Gold: The ‘Coalgate’ Scam
Dr. Pooja Dasgupta* & Tushar Kumrawat* (March-April 2016)

In their case they said that The coal allocation scam, or ‘Coalgate’ as it is popularly
referred to in the media, is a political scandal that engulfed the UPA government
in 2012. The scam came to light after the Comptroller and Auditor General of
India (CAG) accused the government of India for allocating 194 coal blocks to
public and private enterprises for captive use in a flawed, between 2004 and
2009.
Coal allocation scam or coalgate is a major political scandal regarding the
allocation of coal blocks to public sector entities and private companies, without
competitive bidding .
Government had the authority to allocate coal blocks by a process of competitive
bidding, but chose not to do so this is the motive of CAG’s argument. Which
resulted both public sector enterprises (PSEs) and private companies paid less
than they might have paid . The CAG initially estimated a Rs. 10.6 lakh crore loss
to the exchequer, but the final report tabled in the parliament put the figure at
Rs. 1.86 lakh crore.
https://www.longdom.org/articles/coal-is-gold-the-coalgate-scam.pdf

6|Page
5. PNB SCAM

S. Gayathri and 2T. Mangaiyarkarasi (School of Management Studies, VISTAS, Pallavaram, Chennai)

In their research paper told about the Nirav modi scam.

• The PNB scam as such is linked to Nirav Modi, the billionaire in the middle
of this controversy, is a luxury diamond jewellery designer who was ranked
57 in the Forbes list of India's billionaires in 2017.
• He is the founder and creative director of the Nirav Modi chain of diamond
jewellery retail stores, and is the Chairman of Firestar International, the
parent of the Nirav Modi chain, which has stores in key markets across the
globe. The firms have Nirav Modi, his brother Nishal Modi, Mr. Nirav's wife
Ami Nirav Modi, and Mehul Chinubhai Chokshi as partners.
• The problem was detected and reported by PNB to RBI and CBI
• The scam was of 12000 crores
• The internal banking system is not systematic and is prone to fraudulent
activities. PNB is now responsible for the fraud amount. The customers are
panicked that their money in the bank may be under risk while the bank
has assured to honor all its bona fide commitments
• It is mandatory to have the standard operating system of responsible and
responsive banking.

https://acadpubl.eu/hub/2018-119-12/articles/6/1387.pdf

7|Page
 ROTOMAC SCAM ( Rs 3695 crore)

8|Page
 Introduction

Rotomac pens is a well-known brand which is used by almost all the people. Mr
Vikram Kothari got the idea of the Rotomac pens in 1992.
He had a dream to enter into a business which is somehow related to the noble
field of education.
His objective was to provide good quality pens at economic price point to the
people. Within a short period of time he was able to establish a well-known
brand.
Rotomac was one of the first writing instrument brand who actively marketed the
products.
Rotomac launched its first campaign with Bollywood’s queen Ravina Tandon with
the tagline of ‘LIKHTE LIKHTE LOVE HO JAYE”.
Prints and other TV Exposure also helped to build the brand.
This campaign got a big impact when Javed Akhtar sublime his poetry for
retractable ball pen “Fighter”
Later on Bollywood’s biggest star Salman Khan became the fresh Ambassador of
this brand. He endorsed Rotomac as “Write to Information”
After the huge success in the domestic country, Rotomac started to go overseas
and exported its writing instrument to 50 countries around the globe with the
latest technology and trend as per the customers.
Mr Vikram Kothari also forayed into several products and categories such as food,
export, entertainment, fragrances and real estate.
But Rotomac Global Pvt Ltd was the flagship business of Vikram Kothari.

9|Page
MR VIKRAM KOTHARI

Vikram Kothari is the chairman and MD of Rotomac Global Private Limited which
is a Kanpur based company.
Mr Kothari has more than 45 years of running the business. He belonged to a
business family and set up his stationary business under the name of Rotomac in
1980s.
His brother, Deepak Kothari is the owner of world’s renowned mouth fresher that
is Pan Parag. Infact Vikram was one the driving forces in developing it.
In 90s their family business was divided and Vikram got the Rotomac and his
brother Deepak was with Pan Parag.
According to the information Vikram Kothari is the head of Rotomac Exports Pvt.
Ltd., Kothari Foods and Fragrances, Crown Alba Writing Instruments, Mohan
Steels Limited, RFL Infrastructure Pvt. Ltd. and Rave Entertainment Pvt. Ltd.,
besides Group’s real estate ventures at Kanpur, Lucknow, Dehradun &
Ahmedabad.
He has been honored as the Ambassador of Goodwill by Lions club International
in 1983 for his excellent contribution in the area of social welfare.
Mr Vikram Kothari has also been awarded by the Prime minister Mr Atal Behari
Vajpayee with the Best Exporter award.

10 | P a g e
 How the 3700 crore Con was penned

Rotomac Owner and promoter Vikram Kothari took public sectors banks for a ride
between 2008 and 2013 by getting foreign letters of credit for making payments
to his buyers and suppliers abroad who operated from virtual offices in Dubai,
Hong kong and Sharjah.
Rotomac Global Pvt Ltd was engaged in manufacturing pens and approached 7
banks including Bank of Baroda (BoB) taking credit from 15 crore to 200 crore
from 2008 to 2013, mostly for the imports and exports.
Bank of Baroda alone was cheated with 456 crore by Kothari.

11 | P a g e
These were the estimated amount of loan that Vikram Kothari took from above
mentioned seven banks.
It amounted to Rs 2919 Cr and the Interest Liabilities were 776 Cr making it a total
of 3695 Crore.
According to sources, Bank of India is the consortium leader, which sanctioned Rs
754.77 crore. Bank of Baroda gave Rs 456.63 crore, Indian Overseas Bank loaned
Rs 771.07 crore, Union Bank of India sanctioned Rs 458.95 crore, Allahabad Bank
gave Rs 330.68 crore, Bank of Maharashtra gave Rs 49.82 crore and Oriental Bank
of Commerce sanctioned Rs 97.47crore.
Vikram Kothari was declared as a ‘willful defaulter’ by Bank of Baroda in February
2017. He had contested the tag in Allahabad High Court and received an order in
its favour but failed to pay the loans. According to reports, Allahabad Bank, Bank
of India, Bank of Baroda, Indian Overseas Bank and Union Bank of India allegedly
compromised their rules to sanction loans to Rotomac.

12 | P a g e
 “Rotomac bank fraud loan wasn’t for Vikram
Kothari’s pen business but for ‘importing’ wheat”
February 19, 2018

According to sources, the credit was sanctioned and the loan disbursed to Kothari
for importing wheat from a company in Singapore, but the amount was not
utilised for the purpose. Instead, it was diverted to another company and the
money was later remitted to Rotomac.

“Money was sought from the banks for importing wheat from a Singapore-based
company, Bargadia Brothers. But when it was sanctioned, the money was not
utilised to buy wheat. The money first went to Bargadia brothers and then came
back to Rotomac. No export order was ever executed. This round-tripping of
money amounts to misappropriation of funds, criminal breach of trust, and
violation of FEMA guidelines.”

He added: “Most of the transactions of this company are with limited number of
buyers, sellers, sister companies, and subsidiaries of this company.”

According to sources, the company was betting on the foreign exchange rate.
“The company was working for ‘interest rate differential’ in local and foreign
currency. In reality, no genuine business transaction was carried out.,”

In a statement, Kothari said, “First of all, it is not a scam. I am not going anywhere.
I am an Indian citizen and am very much in my hometown. Though banks have
declared my company as a non-performing asset (NPA), I am not a defaulter. The
matter is still sub judice with the National Company Law Tribunal (NCLT). I am
regularly in touch with the banks and am constantly cooperating with them. I
availed the loans and will repay them soon.”

13 | P a g e
CBI begins questioning Vikram Kothari

The Central Bureau of Investigation (CBI) Wednesday started questioning of

Rotomac owner Vikram Kothari at its headquarters in connection with alleged
loan default of Rs3,695 crore.
Earlier, Kothari was being questioned in Kanpur where his company and residence
is located. He was called in New Delhi by the agency which started his questioning
at its headquarters. Kothari, his wife Sadhana, and son Rahul, all directors in
Rotomac Global Pvt. Ltd, have allegedly diverted the bank loans towards purposes
other than they were meant for.

The CBI registered a case on 18 February after receiving the complaint. Initially,
the alleged scam was estimated to be of Rs800 crore but after the CBI started
probe into the accounts of the Rotomac Global Private Limited,it was found that
the company had allegedly taken loans from Bank of India, Bank of Maharashtra,
Indian Overseas Bank, Union Bank of India, Allahabad bank and Oriental Bank of
Commerce.

The Enforcement Directorate (ED) had notified all the land, sea and airports in the
country to prevent the exit of the promoter of Rotomac pens, Vikram Kothari, and
his family members from India, in connection with its money laundering probe.
The agency also conducted searches at multiple locations in Uttar Pradesh,
including in Unnao and Kanpur, to gather evidence in the case. The ED had
slapped criminal charges under the Prevention of Money Laundering Act (PMLA)
against the company and its promoters on 18 February, based on a CBI FIR filed
on the same day.

The income tax department had also attached 14 bank accounts of the pen
manufacturer as part of its tax evasion probe against the company.

14 | P a g e
 References

1. http://www.ijrssh.com/images/short_pdf/1477044215_Naman_Sehgal_14.pdf
2. https://www.longdom.org/articles/coal-is-gold-the-coalgate-scam.pdf
3. http://www.pbr.co.in/2017/2017_month/Jan/22.pdf.

4. https://faculty.iima.ac.in/~jrvarma/papers/vik18-1.pdf.

5. https://acadpubl.eu/hub/2018-119-12/articles/6/1387.pdf

6. https://timesofindia.indiatimes.com/business/india-business/how-a-rs-3700-
crore-con-was-penned/articleshow/62990080.cms

15 | P a g e