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How an Rs 3,700 crore con was penned: Rotomac scam

Rotomac owner Vikram Kothari took public sector banks for a ride between 2008 and 2013 by receiving foreign letters of credit (FLCs) for making payments to his buyers and suppliers abroad that operated from virtual offices in places like Dubai, Sharjah and Hong Kong.

Rotomac Global Pvt Ltd, committed in intermediary trade and manufacturing pens, routinely approached seven banks, including Bank of Baroda’s (BoB’s) international business branch at The Mall, Kanpur, searching credit ranging from Rs 15 crore to Rs 200 crore from 2008 to 2013, mostly for exports and imports. BoB alone was cheated of Rs 456 crore by Kothari.

Instead of utilizing the money to pay buyers/suppliers, the money was round-tripped to accounts of Rotomac and its sister companies. For example, Rs 15.50 crore in packing credit disbursed to Rotomac’s current account for executing an export order of $4.2 million was remitted to the company’s other accounts through RTGS.

Similarly, BoB gave packing credit of around Rs 34 crore for an export order got 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. The CBI FIR claimed that Rotomac received around Rs 16 crore from Bargadia immediately after this. “It clearly shows that no export was made and the packing credit sanctioned was misutilised,” BoB said in its complaint to the CBI.

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. Most of the papers, the CBI claimed, originated in overseas centres.

BoB purported the company did not attach the packing list, mandatory insurance copies of goods, certificate of origin of goods, or the inspection certificate from third parties while submitting documents to it. When BoB officials visited Rotomac’s suppliers and buyers abroad, they found that the import/export business was allegedly running through shell companies.

“Our representative from the Hong Kong branch 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,” BoB said in its complaint to the CBI.

Similarly, when BoB’s Dubai branch officials visited the office of supplier Pacific Universal General, they found only an office boy there. In Sharjah, the office of a buyer/supplier was found closed. The bank purported 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 purported that Rotomac was routing sale transactions from one company and buy transactions from another.

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