KINGFISHER SCAM

INTRODUCTION
■ Kingfisher Airlines is an airline group based in India.
■ Its head office is in Mumbai and Registered Office in Bangalore.
■ Kingfisher Airlines was established in 2003.
■ Owned by Vijay Mallaya
■ The airline started commercial operations on 9 May 2005 and its international
operations on 3 September 2008.
■ Till December 2011; Kingfisher Airlines had the second largest share in India's
domestic air travel market.
STARTING OF THE CRISIS
■ Soaring of crude oil prices
■ Delayed salary
■ Fuel dues
■ Aircraft rental dues
■ Bank arrears leading to frozen accounts
KINGFISHER AIRLINE SCAM
■ Vijay Mallaya took loans against the reputation of Kingfisher Airlines.
■ Highly inflated figures were shown in the financial statements to get the loans
sanctioned.
■ Later the company had huge amounts of losses and couldn’t pay back the loans
■ On August 1, CBI prepared a charge sheet in the case pertaining to loans of
more than Rs 6,000 crore to Kingfisher Airlines by a consortium of 17 banks led
by SBI. The banks are seeking more than Rs 9,000 crore after adding penalties.
■ FIR was registered against Mallya in August 2016 on the complaint of SBI,
which had an exposure of Rs 1,600 crore. PNB and IDBI Bank have an
exposure of .Rs 800 crore each, followed by Bank of India at Rs 650 crore,
Bank of India at Rs 650 crore, Bank of Baroda at Rs 550 crore and Central Bank
of India at Rs 410 crore.
CORPORATES INVOLVED
■ Executives of Grant Thorton submitted highly inflated figures
■ OP Bhatt- SBI chairman
■ GR Gopinath- founder of Deccan Aviation Ltd.
■ Several executives of other banks who sanctioned the loans to KFA
NIRAV MODI SCAM
ABOUT NIRAV MODI
■ Nirav Modi is a Wharton drop out and is a high flying diamond merchant.
■ in 1999 he founded Firestone (now called Firestar).
■ He set up Nirav Modi brand in 2010.
■ His showrooms are in London, Beijing and Hongkong.
■ He is on the board of five companies—Jewelry Solutions International Pvt. Ltd
(which is now amalgamated), Radashir Jewelry Co. Pvt. Ltd, Firestar
International Ltd, Firestar Diamond Pvt. Ltd and Firestar International Pvt. Ltd.
■ He is also on the board of four limited liability partnership (LLP) firms
including Neeshal Enterprises, Paragon Jewellery, Paragon Merchandising and
Panchjanya Diamonds.
■ None of these have assets that match the quantum of fraud perpetrated. (Live
Mint 26 Feb 18)
PNB SCAM
■ Mehul Choksi owner of Gitanjali Gems and Nirav Modi founder of Firestar
International P Ltd. exploited loopholes in banking system by seeking LOU
(letters of undertaking) from PNB and raising credit from various foreign
banks/Foreign branches of Indian banks.
■ On 16 Jan 18 when Modi's men asked for an LOU, the bank asked for 100%
margin as they ought to. Modi’s men contested this and claimed they were
enjoying this facility for many years without cash margin. This led to the
discovery of the fraud.
■ On 5 Feb 18 PNB informed Stock exchanges of a Rs 280 Crores fraud.
■ Later the bank said the money involved was $1771.69M (Rs 11400 Crores).
(Live Mint 19 Feb 18)
PERSONS INVOLVED IN THE SCAM
■ Nirav Modi - Owner of the Nirav Modi firm.
■ Mehul Choksi - Owner of Gitanjali Group and the uncle of Nirav Modi.
■ MK Sharma - Internal Auditor and chief manager of PNB.
■ PNB Employees - Gokul Nath Shetty (Retired Deputy Manager),Manoj Kharat
(Clerk).
■ Vipul Ambani - CFO of Nirav Modi Company.
■ Kavita Mankikar – Executive Assistant and Authorized Signatory.
■ Arjun Patil - Senior Executive of Fire Star Group.
■ Kapil Khandelwal - CFO of Nakshtra and Gitanjali Group.
■ Niten Shahi - Manager of Gitanjali Group.
CONTROLS REQUIRED IN BANKS
■ Linking of all systems in the banks to core banking solution–no stand alone
systems; The private banks like Axis, Yes, HDFC, ICICI have linked LOU and
Core banking.
■ Reconciliation of Nostro accounts with books of accounts.
■ Reconciliation of confirmations for LOU with books of accounts.
■ Credit and Credit risk assessment to be segregated.
■ Bank person sanctioning loan to borrower not to talk to borrower.
■ The way non-fund based limits are treated has to change and they should be on
same footing as fund based limits.
■ Keeping a tab on sensitive sectors like: Jewellery (RBI has issued circulars
stating how banks have to guard themselves against money laundering).
■ More robust concurrent audits and inspections.
ROTOMAC SCAM
WHAT IS THE SCAM?
■ Rotomac Global Pvt Ltd, engaged in intermediary trade and manufacturing pens
■ Rotomac routinely approached seven banks, including Bank of Baroda's (BoB's)
international business branch at The Mall, Kanpur, seeking credit ranging from
Rs 15 crore to Rs 200 crore from 2008 to 2013,for exports and imports
■ BoB alone was cheated of Rs 456 crore by Vikram Kothari(Director)
■ Instead of using the money to pay buyers/suppliers, the money was round-
tripped to accounts of Rotomac and its sister companies.
■ BoB gave packing credit of around Rs 34 crore for an export order received
from Starcom Resources PTE Singapore for supply of 15,700 tonnes of wheat.
This money was remitted to the account of one Bargadia Brothers Pvt Ltd.
Continuation
■ Kothari indulged in trade for which incomplete documents were produced, or
the company submitted photocopies of bills of loading and other documents of
transactions on the pretext that original papers were sent to the importer.
■ Bob representatives Hong Kong branch of visited the address given by Rotomac
for Gulf Distribution Ltd and found that the latter maintained a virtual office and
physical office was not present
■ The bank alleged that Kothari and Rotomac violated Foreign Exchange
Management Act rules and worked for interest rate differential in local and
foreign currency in the guise of trade without having any genuine business
transactions.
■ BoB also alleged that Rotomac was routing sale transactions from one company
and purchase transactions from another.