The Serious Fraud Investigation Office (SFIO) on Thursday, March 19, arrested Rotomac group promoter Rahul Kothari along with Frost International directors Sujay Desai and Uday Desai in connection with an alleged accounting fraud worth Rs 7,500 crore caused to a consortium of 14 banks, according to sources.
The Rotomac group has reportedly defaulted on loans of Rs 4,000 crore, whereas the Frost International group has defaulted on liabilities of Rs 3,500 crore, respectively, according to the SFIO.
"These trio were remanded to SFIO custody by the Magistrate Court on Thursday. The SFIO had sought remand until March 23 owing to the coronavirus pandemic. They have been granted transit remand until Saturday," an official confirmed.
SFIO probes into the affairs of Rotomac & Frost International
The SFIO, which comes under the corporate affairs ministry, is conducting probes into the affairs of the Rotomac group of companies and Frost International. Both have significant liabilities towards various public sector banks.
The sources said it was revealed that the companies were indulging in round tripping of funds by abusing the merchanting trade scheme.
According to them, in order to obtain bank funds required for the same, they manipulated their financial statements and issued fictitious debit notes to many foreign entities, which were under their control.
This was done to fraudulently transfer the foreign exchange losses incurred during the fraudulent merchanting trade to trade receivables. As a result, they showed a healthy balance sheet, the sources said.
Further, the sources said Rotomac group of companies and Frost International have total outstanding liability of Rs 4,000 crore and Rs 3,500 crore towards 14 public sector banks against which they have defaulted.
(With agency inputs)