DRI unearths Rs 950-crore fraud

MUMBAI, Jan 17: The Directorate of Revenue Intelligence (DRI) has unearthed a Rs 950 crore fraud by the city-based Hamco group of compani...

MUMBAI, Jan 17: The Directorate of Revenue Intelligence (DRI) has unearthed a Rs 950 crore fraud by the city-based Hamco group of companies through foreign letters of credit (LCs) route. It has handed over the case to the Directorate of Enforcement as it involves massive FERA violations.“We are looking into this banking fraud and are processing the papers,” a CBI official said here today.

Hamco group chairman Babubhai M Patel has also applied in the city sessions court for anticipatory bail and made DRI and enforcement directorate as respondents, DRI sources said.

The group comprising Hamco Mining and Smelting Ltd, Dravya Chemicals Ltd, Nariman Point Chemicals Ltd and Hindustan Industrial Chemicals Ltd — all public limited companies — opened foreign LCs during the last three years for import of non-ferrous metals for CIF value of approximately Rs 1,000 crore. An amount of Rs 950 crore was remitted against the LCs drawn and the goods not shipped or received were to the tune of Rs 675 crore, the sourcessaid. Reserve Bank of India (RBI) has appointed special auditors to go into the transactions, the sources said.

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Hamco group operated mainly through Canara Bank’s Nariman Point branch, Vijaya Bank’s Excelsior branch, State Bank of Patiala’s Dadar (west) branch and Federal Bank Ltd’s Dadar (east) branch.

On the advise of RBI, Canara Bank has decided to repudiate LC commitments after taking legal opinion, suspecting that the transactions do not involve movement of merchandise, according to an inspection report of Canara Bank. The banks have opened LCs in favour of Frobevia, Switzerland, Sogen, Belgium and Solo Industries, UK. B M Patel’s son Madhav Patel controls Solo Industries Ltd, Sharjah, UAE as well as Solo Industries, UK and is based in Sharjah, DRI investigations revealed.

It has been further revealed that the bills of lading have been issued by shipping companies, Euromaritime Lines and Middle East Express Line, which are controlled by B M Patel’s son-in-law Ashok Verma. DRI sources said goods notshipped or received were to the tune of Rs 675 crore and an amount of Rs 260 crore was received under the guise of insurance claim.

“The so-called insurance amount was remitted by Solo, Sharjah instead of insurance companies,” sources pointed out. The sources said Canara Bank is the biggest loser as they are the main bankers used to open LCs and have lost to the tune of Rs 150 crore. Other banks have lost to the tune of Rs 50 crore each approximately. Vijaya Bank has initiated actions to stop the final payment of the pending LCs by filing suits, both criminal and civil, at London as well as at Geneva. "Banks are in a state of shock and are still wondering what action can be initiated to recover the money lost,” DRI sources said.