SEL fund diversion: Report hints at involvement of another firm

Ludhiana: A day after TOI reported registration of an FIR against directors of SEL Textile Limited, startling details of the forensic audit conducted by lending banks have emerged. The city-based textile company owes more than Rs 1,530.99 crore to banks.
In the forensic audit report, another big textile company of Ludhiana has been accused of facilitating “Kite flying operations and fund diversion” by the company. The report claims that in some of the transactions, the truck shown to have been used for transporting goods between both companies has been found to be non-existent. The CBI has not named the other company or its owner as accused in its FIR against SEL Textile Limited.
According to the forensic audit report, “ ***** Group (name withheld) is a closely held entity operating out of Ludhiana. The company was identified as one of the key participants with its other group companies in facilitating the ‘kite flying operations’ and ‘facilitating diversion’ resorted through a chain of purchase and sale of Duty Free items executed through circular and layered route adopted by the company for the purpose. Large number of transactions involving huge amounts carried out between M/S SEL textile Limited and M/S ********** Limited (name withheld).”
The report further says, “On further scrutiny, it is found that the lorry used for transporting the goods was not in existence in some of the cases. Company (SEL) failed on account of inefficient execution, poor capitalisation and lack of transparency of high levels. Money trail of the end use of funds granted by the working capital and term lenders exposed the diversion of funds by using a circular and layered route by using the combination of suppliers, customers who are considered suspect, related parties and the holding company by entering into unwarranted large transactions which could not be linked to the business plan.”
Report mentions dealings of SEL with several Dubai-based companies and says, “There have been huge transactions by the accused company (SEL) with some firms (including the Ludhiana-based textile group) which are not genuine trade transactions. The transactions have been made by the company through its directors in connivance with each other not only to divert huge funds with an intention to defraud the complainant bank but also to siphon off public money out of India.”