CBI registers Rs 200 crore loan default case against CMD of Simbhaoli Sugars

NEW DELHI: The CBI has filed a case against Simbhaoli Sugars Ltd and its CMD and directors for cheating Oriental Bank of Commerce (OBC) of Rs 200 crore.

OBC has claimed that a fraud worth over Rs 200 crore has been committed by Simbhaoli Sugars Ltd, Hapur with the bank's Meerut branch in 2011, and again in 2015.

The CBI has named CMD Gurmit Singh Mann, deputy MD Gurpal Singh and eight others including the CFO, executive and non-executive directors of Simbhaoli Sugars Ltd, apart from unknown bank officials, in its FIR.

One of the board directors in Simbhaoli Sugars booked for bank fraud is the son-in-law of a top Congress leader in Punjab.

The CBI is carrying out searches at multiple locations in Delhi and Uttar Pradesh in connection with its case against Simbhaoli Sugars Ltd.

The company had approached OBC in 2011 seeking around Rs 150 crore in loan for the purpose of financing around 5,200 sugarcane farmers for which it provided KYC documents for opening individual accounts of farmers. However, when the money was transferred in farmers’ accounts, it was diverted for other purposes.

When OBC approached Debt Recovery Tribunal (DRT), Simbhaoli Sugars took another loan in 2015 of Rs 110 crore to pay its liability in one go.

Simbhaoli Sugars Ltd is one of India's largest sugar refinery companies and is listed on the Bombay Stock Exchange.

How the fraud happened

In its complaint to the CBI, OBC claimed that Simbhaoli had approached it in November 2011 with a proposal for financing sugarcane farmers (representing 5,762 farmers) under the tie-up arrangement with the company (maximum limit of Rs 3 lakh per farmer) within the overall exposure cap of Rs 150 crore, which was approved by OBC in December 2011.

The company supplied to the bank the names of individual farmers, as well as details of land holding and cane supplied by them in the previous season. It was also supposed to submit the KYC and other requisite documents along with the loan application of individual farmers.

The bank disbursed loans to 5,762 farmers between January and March 2012 totalling Rs 148.59 crore.

The loans were disbursed through individual loan accounts opened for farmers and consolidated amount of each disbursement was credited in the escrow account of Simbhaoli Sugars, on the basis of undertaking given by the company that inputs like seed, fertilizers and other necessary equipments were supplied by it to all the individual farmers.

It turned out that Simbhaoli had issued improper KYC certificates in the names of the farmers. The company transferred the funds from the escrow account to other accounts maintained by it with SBI, Punjab National Bank and UCO Bank through RTGS. This way, OBC claimed, Simbhaoli Sugars has misappropriated the money lent by it and there is clear cut division of funds.

CBI says that Simbhaoli caused a loss of Rs 109 crore to OBC. The loan account of Rs 148.59 crore was declared a non performing asset (NPA) in March 2015 and a fraud in May 2015.
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