Thuggery at Cosmos Bank (23/08/2018)

Euro Ceramics Limited along with its subsidiary
Euro Merchandise (India) Limited:

Term loans and cash credit totaling to Rs. 59.68 crore to EURO CERAMICS Limited and Rs.32.20 crore to its subsidiary EURO MERCHANDISE (INDIA) LIMITED through Vile Parle East Branch, Mumbai turning into NPA as ‘quick mortality’.

The victims are Cosmos Co-operative Bank Limited and State Bank of India.

The borrower company Euro Ceramics Limited was sanctioned term loan and cash credit facilities as follows:

Sr. No.	Type of Facility	Account Number	Amount of Loan	Date of sanction
1	Term Loan	01780180620	35,75,00,000/-	28/11/2011
2	Term Loan	01780180639	13,00,00,000/-	28/11/2011
3	Term Loan	01780180648	2,93,00,000/-	28/11/2011
4	Cash Credit	01760010046	8,00,00,000/-	28/11/2011

All these loans became NPA on 30/11/2012 and joined the ever expanding list of “quick mortality’ borrowers of Cosmos Co-operative Bank Limited.

Another borrower Company Euro Merchandise (India) Limited, a wholly owned subsidiary of Euro Ceramics Limited was sanctioned term loan of Rs.32.20 crore as follows:

Sr. No.	Type of Facility	Account Number	Amount of Loan	Date of sanction
1	Cash Credit	01760010532	16,00,00,000/-	28/06/2008
2	Term Loan – I		3,00,00,000/-	28/06/2008
3	Term Loan – II		2,00,00,000/-	28/06/2008
4	Cheque purchase		20,00,000/-	28/06/2008
5	L/C		8,00,00,000/-	28/06/2008
6	Bank Guarantee		3,00,00,000/-	28/06/2008

An ad-hoc cash credit facility of Rs.2.50 crore was again sanctioned on 27/08/2011.

The account of Euro Merchandise (India) Limited became NPA on 31/10/2011.

It may be mentioned here that Euro ceramics Limited has also given corporate guarantee of Rs.32.20 crore to Cosmos Co-o. Bank Limited for extending credit facilities to its wholly owned subsidiary Euro Merchandise (India) Limited on 13/09/2007.

Euro Ceramics Limited had submitted CDR and the CDR was approved on 29/09/2011 and MRA was executed on 25/02/2012. And the Company defaulted on repayment of even restructured scheduled immediately from April 2012 as explained hereinafter.

During this year, the Company, Euro Ceramics Limited gave loans of Rs.73.71 crore to sister concerns or parties listed in the register maintained u/s. 301 of the Companies Act, 1956. This figure increased to Rs.77.70 crore by 31/03/2014. The loans were given to sister concerns without any stipulation of principal repayment and the interest was also overdue, clearly suggesting that the loans were a dead loss as the sister concerns were also in red along with Euro ceramics Limited. This is a clear case of diversion of funds and the Bank has failed to take cognizance of such divergence.

During FY 2011-12, accumulated losses eroded Company’s net work by more than 50%.

During the FY 2012-13, after CDR, the sales of Euro Ceramics Limited declined by whopping 49.78% and the Euro Ceramics reported a loss of Rs.107 crore as against the loss of Rs.93.22 crore for FY 2010-11. Company’s net worth was completely eroded in FY 2012-13. Meanwhile, its wholly owned subsidiary Euro Merchandise (India) Limited also had gone kaput with its net worth getting completely eroded and Euro Ceramics Limited getting exposed to its liabilities by virtue of execution of corporate guarantee and advancement of loans. Euro Ceramics had defaulted in repayment of even restructured installments under CDR scheme to the tune of Rs.33.27 crore as on 31/03/2013.

The default of Euro Ceramics Limited in repayment of restructured loans and interest as on 31/03/2014 was as follows:

Principal amount of term loans and cash credit: Rs.454.76 crore

Interest overdue: Rs.92.87 crore.

This default as on 31/03/2014 was aged about 24 months, i.e. default started from April 2012 itself. As per statutory auditor, default in respect of Cosmos Co-op. Bank Limited started from April, 2012.

The working of its wholly owned subsidiary Euro Merchandise (India) Limited was also on the downhill right from FY 2008-09. As against the PBT of Rs.4.77 crore for FY 2007-08, the Company incurred a huge loss of Rs.6.04 crore. The wholly owned subsidiary eventually met the fate of its parent. In spite of this decaying performance, the Cosmos Bank surprisingly sanctioned an ad hoc cash credit of Rs.2.50 crore on 25/08/2011. The question gets bigger when its group concern Euro Multivision Limited was already a defaulter since January 2011 for a huge amount.

The position of Euro Ceramics Limited as on 31/03/2017 is as follows: (Rs. In Lakhs)

Name of the Bank	Principal Outstanding as on the date of turning NPA	Agreed Settlement Amount	Interest Outstanding as per agreed terms of settlement as on March 31, 2017
State Bank of India	25,598.96	14,500.00	777.07
Cosmos Bank	5,805.03	4,000.00	103.04
Total	31,403.96	18,500.00	880.11

A brief reference to Euro Multivision Limited at this juncture would be apposite. This group company also went downhill in FY 2010-11 to eventually become NPA on 01/04/2012. As stated separately, this company had defaulted in repayment to Cosmos Bank since January 2011.

Like Euro Multivision Limited, Euro Ceramics Limited also filed a reference before BIFR u/s. 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 and Banks after waking up from their slumber approached DRT. This Group really knows how to hide behind the facade of laws. The loans of such magnitude could not have been sanctioned without the permission of the Board of Directors.

The Directors of the bank have a fiduciary relation with the shareholders of the Bank. The Directors are supposed to work within the framework of law and well established prudent banking norms. Any deviation from these norms by the Directors would constitute fraud and criminal breach of trust of the shareholders of the bank. The Directors are liable to make good the loss suffered by the Bank due to mala fide and fraudulent acts from the personal assets of such delinquent directors and employees.

About Rs.95 crore odd plus interest are locked as NPA in these two accounts where deviation from prudent banking practices and absolute lack of due diligence is prima facie visible, giving rise to criminality. I am concerned how many skeletons are going to tumble out of the closets of the Cosmos Bank. Factors such as disbursement of huge amounts by violation of prudent banking norms/practices and without taking adequate collateral security, gross negligence and total absence of due diligence in monitoring deployment of funds for the given purpose to prevent diversion of funds and quick mortality do point towards serious acts of omission and commission bordering on fraud and criminal conspiracy. In my sincere opinion, this is another fit case for an ‘in-custody’ police investigation.

So far, I have asked the Bank information on Euro Multivision Limited (Rs.81 crore), EURO CERAMICS LIMITED (Rs.59.68 crore) and its subsidiary EURO MERCHANDISE (INDIA) LIMITED (Rs.32.20 crore) and EURO DÉCOR PRIVATE LIMITED (Rs.82.63 crore).

There are many default accounts of this Group. It is not possible for a common man like me to investigate everything. It is the job of RBI, CBI, EOW, RoCS and others.

This Group really knows how to hide behind the facade of laws. The loans of such magnitude could not have been sanctioned without the permission of the Board of Directors. The recovery is hardly worth any mention. It is privately acknowledged that there is no possibility of any more recovery.

I understand that this particular Group accounts for about Rs.900+ crore of NPAs. In one of the meetings I have had with some Directors of the Board, Mr. Krishnakumar Goyal had sheepishly admitted this gigantic default in the presence of Chairman Milind Kale and Chairman-Emeritus Mukund Abhyankar. It seems the constituents of this group prepare CDR first and then approach the banks for loans later. It is an enigma that there is demonstrated lack of due-diligence with reference to various accounts of this particular group.

Which Director or Directors introduced this Group to the bank? Investigation agencies should find out and the I custody interrogation would reveal the whole conspiracy.

Bank Loot thus continues.