CBI books PSU's ex-CMD and former officials in alleged fraud

New Delhi: The CBI has registered an FIR against former State Trading Corporation CMD, six ex-officials and KS Oils Ltd over alleged irregularities in extending Rs 75 crore in trade finance for mustard oil purchases between 2010 and 2014, officials said on Friday.

The CBI has alleged that STC extended trade finance to KSOL without proper due diligence, issued Letters of Credit (LC) beyond the approved limit, shell and front companies were used as suppliers of mustard oil and LC proceeds were routed back to the company, according to the FIR.

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The agency said in the FIR -- registered after over a year of preliminary enquiry -- that a false storage quality certification was issued and timely recovery action was not taken, causing wrongful loss to STC and corresponding wrongful gain to the accused persons and entities.

KSOL Chairman Ramesh Chand Garg and Director Davesh Agarwal had approached STC for trade finance for the purchase of mustard oil, it said.

“In this arrangement, KSOL was the business associate, which was to identify/nominate suppliers for the supply of mustard oil; STC was to provide trade finance by issuing usance Letters of Credit in favour of such suppliers; the suppliers were required to supply mustard oil; and Star Agri Warehouse and Collateral Management Ltd. was appointed as Collateral Management Agency for receipt, storage, quality certification and monitoring of mustard oil stock on behalf of STC,” the FIR alleged.

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The CBI detected a number of irregularities in the process for sanctioning the proposal for trade finance and its execution.

“Enquiry further revealed that both the supplier companies--Chambal Valley Agro Products Pvt. Ltd. and Gwalior Commodities Pvt. Ltd. were shell companies being managed and controlled by Ramesh Chand Garg and Davesh Agarwal,” the FIR alleged.

The CBI found that Agarwal got directors and signatories appointed in these companies and got blank cheques and documents signed, thereby facilitating the diversion of LC proceeds to KSOL, the FIR alleged.

“Enquiry revealed that Ramesh Chand Garg, Chairman, KSOL, was controlling

the affairs of KSOL and also the supplier/front companies, namely Chambal Valley Agro Products Pvt. Ltd' and Gwalior Commodities Pvt. Ltd. He dishonestly used these entities to obtain LC proceeds from STC and caused routing of substantial funds back to KSOL,” it said.

The agency also flagged a number of irregularities allegedly committed by the then officials of STC.

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“Enquiry revealed that N K Mathur, the then CMD, STC, headed the committee

which approved trade finance of Rs.75 crore in favour of KSOL, even the complete details of existing STC exposure towards KSOL were not placed before COM, He also met Ramesh Chand Garg several times and allowed extensions for lifting/liquidation of stock beyond due date instead of ensuring timely sale/recovery,” the FIR alleged.

The CBI has listed seven former senior officials of STC, including Mathur, besides Garg, Agarwal, KSOL and other companies.

State Trading Corporation of India (STC) is no longer functioning as an active trading company. Following mounting losses and a severe liquidity crisis, the Indian government halted all of its commercial business operations. The corporation currently operates as a non-operative entity, with its primary remaining revenue coming from the rental income of its surplus real estate, such as the Jawahar Vyapar Bhawan in New Delhi. The government (which holds a 90% stake in STC) has been working on formalizing its complete closure.

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