CBI registers case against Frost International for Rs 3592 crore bank fraud

The CBI has booked Kanpur-based Frost International Ltd, its directors Uday Desai, wife Nilima, son Sujay Desai and daughter Sanjana among others, accusing them of cheating 14 banks to the tune of over Rs 3,592.48 crore.

Look Out Notices have been issued against 10 accused named in the FIR to prevent them from leaving the country.

According to the FIR which came following a complaint by the Kanpur Zonal office of Bank of India on behalf of the consortium, Frost International Ltd and its promoters had worked in the "guise of undertaking merchanting trade without having any genuine business transactions and defaulted in meeting its payment obligations" towards a consortium led by Bank of India.

The company and its directors allegedly used forged documents as genuine, diverted and siphoned of bank funds and cheated the lenders to the tune of Rs 3,592.48 crore, it claimed.

Besides Desai's family members, the other accused named in the FIR are Sunil Lalchand Verma, his wife Rita, and his sons Nipun and Saral as well as Anoop Wadhera and his wife Poonam. Those named in the FIR are either Directors of the company or who were guarantors for loans extended by the bank.

Along with Frost International, three other companies -- RS Builders Pvt Lt, Globiz Exim Pvt Ltd and NSD Nirman Pvt Ltd -- promoted by the accused and which stood as guarantor were also named as accused.

Frost International is engaged in trading of multiple agro commodities, minerals and metals, bullion, polymer, chemical and petrol products, plastic, textiles and other commodities. It has suppliers and buyers in countries like Bangladesh, China, Hong Kong, UAE, US, West Indies, Cambodia, Saudi Arabia, Taiwan and Switzerland among others.

The complaint, which is part of the FIR, said a forensic audit has found "serious" irregularities like diversion of funds through providing unsecured loans to non-business related parties, no actual export of goods against merchant trade transactions, mismatch in ship movement data and mismatch in 18 merchant trade transactions among others. It also "found out" that the majority of payments towards sale were received from third parties and not from the parties to whom the goods were sold.

Another anomaly unravelled in the forensic audit was that the banks did not receive confirmation from the debtors of Frost International based in Hong Kong and other locations about the loan they took, which "indicated that those debtors were fictitious and there may not be any dues outstanding from those debtors", it said.

The complaint claimed that the company and its promoters had “worked in the guise of undertaking merchanting trade without having any genuine business transaction and defaulted in meeting its payment obligation towards the bank by diverting and siphoning off the member bank's funds”.