Rs 980-mn OBC bank fraud: CBI books Simbhaoli Sugars; top 10 developments

With the Rs 114-billion Punjab National Bank (PNB) scam involving Nirav Modi still being fresh news, the Central Bureau of Investigation (CBI) on Sunday registered a case against Simbhaoli Sugars Limited, its Chairman Gurmit Singh Mann, Deputy Managing Director Gurpal Singh and others on a complaint from the Oriental Bank of Commerce (OBC) in connection with an alleged bank loan fraud of Rs 978.5 million (Rs 97.85 crore).  

Gurpal Singh is the son-in-law of Punjab Chief Minister Amrinder Singh. 

The fresh case comes days after news broke of a Rs 3.9-billion fraud at the same bank. With the latest development, the bank could be looking at losses to the tune of Rs 5 billion.  

Further, the company's Chief Executive Officer (CEO) G S C Rao, Chief Financial Officer (CFO) Sanjay Tapriya, Executive Director Gursimran Kaur Mann and five non-executive directors have also been booked by the agency. Simbhaoli Sugars Limited is one of the largest sugar mills in the country. 

While the amount involved may pale in comparison to the billions of rupees that Nirav Modi has cost PNB, the spate of scams that have hit the banking sector recently is worrisome. 

Here are the top 10 developments in the latest scam to hit India's banking sector after the Nirav Modi fraud at PNB: 

1) Two loans at the centre of scam: According to agency reports, the CBI probe focuses on two loans — one amounting to Rs 978.5 million (Rs 97.85 crore), which was declared fraud in 2015, and another corporate loan of Rs 1.1 billion (Rs 110 crore), which was used to repay the previous loan. 

The second loan was declared as a non-performing asset (NPA) on November 29, 2016, according to the CBI FIR. 

2) Punjab CM's relative involved: Gurpal Singh is the son-in-law of Punjab Chief Minister Amrinder Singh.  

3) Simbhaoli Sugars booked: The probe agency on Sunday registered a case against Simbhaoli Sugars Limited, its Chairman Gurmit Singh Mann, Deputy Managing Director Gurpal Singh and others in connection with alleged bank loan fraud. 

The company's Chief Executive Officer G S C Rao, CFO Sanjay Tapriya, Executive Director Gursimran Kaur Mann and five non-executive directors have also been booked by the agency.

4) CBI conducting searches: On Sunday, the CBI carried out searches at eight premises, including the residences of the directors, the factory, the company's corporate office, and the company's registered office, in Delhi, Hapur, and Noida, respectively, CBI spokesperson Abhishek Dayal said.  

5) The legal sections involved: The case is registered against the chief managing director (CMD) of the company and others, including directors, CEO, CFO, unknown bank officials, and other private persons, u/s 120-B r/w sec 420 & 409 of the Indian Penal Code (IPC) and Sec 13(2) r/w 13(1)(d) of the Prevention of Corruption Act, 1988, for causing a loss of Rs 1.09 billion (Rs 109.08 crore approximately) to the bank. 

6) OBC incurred Rs 1.09-billion loss: The bank was allegedly cheated to the tune of Rs 978.5 million (Rs 97.85 crore), but the loss incurred by the bank is Rs 1.09 billion (Rs 109.08 crore), the FIR read. The Oriental Bank of Commerce complained to the CBI on November 17, 2017. However, the agency registered a case of criminal conspiracy and cheating under the Prevention of Corruption Act on February 22. 

7) Company dishonestly, fraudulently diverted loan money: According to the FIR, OBC sanctioned a loan of Rs 1.49 billion (Rs 148.6 crore) to the company in 2011. The loan was sanctioned for financing 5,762 sugarcane farmers based on a tie-up agreement under a Reserve Bank of India (RBI) scheme for supplying sugar produce to the company from January 25, 2012, to March 13, 2012.

However, the loan money was "dishonestly and fraudulently diverted by the company for its own needs", Dayal said. 

According to an MoU, out of the price to be paid by Simbhaoli Sugars Limited to the farmers, loan liabilities were to be adjusted and the remaining amount was to be paid by the company to the growers, according to the FIR. 

8) Second loan also turned NPA: The account turned NPA on March 31, 2015, and was declared alleged fraud by the bank to RBI on May 13, 2015, for an amount of Rs 978.5 million (Rs 97.85 crore). OBC alleged that in addition to the existing NPA, the bank, under multiple banking arrangements, sanctioned another corporate loan of Rs 1.1 billion (Rs 110 crore) to the company on January 28, 2015, to pay its outstanding loan of Rs 978.5 million (Rs 97.85 crore). 

The bank adjusted the total liability of Rs 1.13 billion (Rs 112.94 crore) towards the company by way of deposit of the new corporate loan. "The corporate loan, too, turned NPA on November 29, 2016," Dayal said. 

9) OBC already facing 3.9-bn fraud: The sugar company fraud came out days after another alleged fraudulent loan scam, involving Rs 3.90 billion, emerged in the jewellery sector. The CBI has registered a case against a Delhi-based jeweller on a complaint from the Oriental Bank of Commerce.

The state-owned lender has alleged that the firm, Dwarka Das Seth International, cheated the bank with the help of some of its officials, using Letters of Credit (LCs) — a banking instrument similar to those used by a group of companies belonging to Nirav Modi and Mehul Choksi to allegedly defraud PNB of Rs 114 billion. 

10) CBI exposes three fresh cases of financial frauds: Three fresh incidences of financial fraud have come to light as the CBI filed cases against a jeweller, a businessman and a public servant on complaints by three different banks last week. 

Other than the case involving Dwarka Das Seth International, the Bank of Maharashtra and Barmer office of the PNB rushed to the CBI as well with their complaints of fraud. 

Last week, the CBI filed a case against businessman Amit Singla and others on a complaint of the Bank of Maharashtra for a loan through forged documents and its criminal misappropriation and use. 

The agency also filed a case against Inder Chand Chundawat, then Senior Branch Manager in the Punjab National Bank (PNB)'s Barmer office in Rajasthan, for abuse of his official position.

Last week, the PNB approached the CBI for a second time against one of its branch managers at its Barmer office in Rajasthan. According to the complaint, the branch manager had defrauded the bank of over Rs 20 million in 2011 and the bank had even suspended the official following an internal inquiry.