The Central Bureau of Investigation (CBI) has launched an investigation into a machinery company for its alleged involvement in fraudulent activities, leading to significant losses for the Small Industries Development Bank of India (SIDBI). The probe focuses on the company's loan account, which turned into a Non-Performing Asset (NPA) in June 2013. Hindustan Times reported that the CBI took action after a complaint filed by the bank's Deputy Legal Advisor in Mumbai, who accused the company of disposing of hypothecated plants and machinery without the bank's consent.
Allegations and Criminal Offenses
According to a source within the CBI, a case has been registered against the accused firm and its two directors under relevant sections of the Indian Penal Code and the Prevention of Corruption Act. The allegations state that the accused firm, in a criminal conspiracy, committed various offenses, including cheating, criminal breach of trust, and criminal misconduct. The firm is accused of disposing of the hypothecated plant and machinery without obtaining the necessary consent from the bank. Notably, the accused firm specializes in the production of iron castings for original equipment manufacturers.
Magnitude of Losses
The bank reported to the CBI that the total outstanding dues, comprising the principal amount, interest, and additional charges, reached a staggering ₹12.12 crore as of February 2023. The loan account was officially declared as fraudulent by the bank in April 2018, indicating the severity of the company's actions.
Expansion Project and Funding
In 2011, the accused firm embarked on an ambitious ₹10.4-crore expansion project with high hopes of securing lucrative orders from the Indian Railways, as per the requirements of the Research, Designs, and Standards Organization. To finance this project, the firm obtained term loans amounting to ₹3.75 crore from SIDBI specifically designated for the purchase of machinery. However, the loan account eventually became an NPA, prompting the bank, in collaboration with another financial institution, to take symbolic possession of the company's manufacturing unit.
Disappearance of Assets
During a verification visit conducted by the bank in March 2018, alarming findings came to light. The bank's complaint revealed that the entire factory building/shed had been demolished, leaving no trace of the machinery that had been hypothecated. This discovery raised suspicions that the company continued to retain physical possession of the factory premises while allegedly disposing of the machinery, as per sources within the CBI.
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