The Commission observed various irregularities in trade transactions for exports of various items under Credit Linked Insurance Scheme (CLIS) operated by STC, Mumbai.
"It was observed that during the period 2005-09, various business firms or associates had undertaken export of items such as gold jewellery, construction material, etc, through STC, Mumbai, under the CLIS scheme.
"Due diligence was not exercised by the concerned officials of STC to ensure the credibility of suppliers or associates before entering into business transactions with them," the CVC said.
It said non-compliance of various terms and conditions, as envisaged in CLIS and various circulars issued by STC from time to time in this regard, resulted in a huge financial risk or liability of an overall amount of Rs 725.09 crore (as on September 15, 2010) besides interest and other charges, without chances of recovery from the associates or insurance companies.
The STC is a premier international trading house owned by the Government of India.
"There were adequate tools available with STC to take care of eventualities in the event of default in payment by foreign buyers, but the same were not invoked or utilised by the concerned officials of STC to safeguard organisation's interests," the probity watchdog said.
It said that fixing of credit limit of local suppliers or associates and proper monitoring could have avoided the situation of accumulation of defaults in payments by foreign buyers.
"Initiation of major penalty proceedings against erring officials has been advised by the Commission," the CVC said without divulging further information on the accused "as the case is still being looked into".
