Thuggery at Cosmos Bank (25/08/2018)

KALANIKETHAN TEXTILES AND JEWELS PRIVATE LIMITED

CIN: U18101TG2003PTC041238

This borrower is based in Hyderabad. The loan of Rs.89.30 crore was sanctioned by the Cosmos Bank on 22/03/2014.

The Company had earlier borrowed from HDFC bank and State Bank of India. The entire loan had become sticky and on the verge of becoming NPA. The borrower could not have defended a professional set up like HDFC Bank. The borrower company therefore shifted its attention to more pliable and thoroughly corrupt Cosmos Co-operative Bank Limited.

The borrowing from HDFC Bank was Rs.48.50 crore.

The borrower applied for the loan facility of Rs.89.30 crore on 18/01/2014. Like in many other fraud cases, the loan was quickly sanctioned within 2 months vide Board Resolution No. 237 dated 11/03/2014 and Resolution No. 13 (10/1) dated 20/03/2014.

The breakup of Rs.89.30 crore is as follows:

Sr.No.	Type of Loan	Amount in INR crore	Security
1	Cash Credit (Takeover and Enhancement)	56.00	Hypothecation of Current assets
2	Term Loan (Takeover from HDFC Bank)	9.15	Hypothecation of furniture and equipment.
3	Term Loan (Takeover form HDFC Bank)	3.15	Hypothecation of furniture and equipment.
4	Term Loan (New)	21.00	Hypothecation of furniture and equipment.

Note:

•         Cash credit of Rs.56.00 crore consisted of takeover of Rs.35 crore from HDFC Bank and enhanced credit of Rs.21.00 crore.
• Term Loan of Rs.9.15 crore was the takeover of the HDFC Bank Term Loan.
• Term Loan of Rs.9.15 crore was the takeover of the HDFC Bank Term Loan.
• Term Loan New of Rs.21.00 crore was for the purpose of reimbursement of capital expenditure in respect of 21 stores at the rate of Rs.1.00 crore per store…!!! This is clearly stated in the sanction letter dated 22/03/2014.

It is an undisputed fact that the Cosmos Bank had not only taken over an extremely weak or perhaps NP account from HDFC Bank but also gave enhanced loans to it. This is happening when the Risk Analysis & Strategy Expert Mr. Vikrant Ponkshe was the MD of the Bank. One is left wondering what risk analysis he would have done to sanction such a loan!!

Rs. 21 crore were given as reimbursement of capital expenditure to the extent of Rs. 1 crore per outlet…!!?

What type of expenditure would constitute capital expenditure for an outlet of a borrower dealing in textiles and jewelry? Except furniture and electrical fittings, flooring nothing can be envisaged with the wildest of imagination. The resale of value of such expenditure is absolute Zero. The highly qualified risk analyst Mr. Vikrant Ponkshe failed to notice this and the Directors who were CAs and Advocates also merrily ignored this. The absolute fraud is thus too apparent to be missed by anyone.

Cosmos Bank not only took over Rs.48.50 crore from HDFC Bank Limited but also gave fresh loans of Rs.40.80 crore to this Company.

This Company, like Kingfisher Airlines, has valued its trademark “Kalanikethan” at Rs.25.00 crore and has also created fresh charge over it. And the charge is created and registered in favour of Mr. Juturu Sudhakar in consideration of he extending the guarantee to Cosmos Bank.

The guarantors of the above loans are:

Directors: Mr. V Leela Kumar, Mrs. V Laxmi Sarada, Mr. G Raju Krishna and Mr. Srinivas Legisetty.

Other Guarantors: Mr. Juturu Venkateshwara Ravi Prasad, Mr. Juturu Gopala, Mr. Juturu Bhaskar, Mr. Juturu Sudhakar, Mr. G Narayan Das, Mr. N Siva Kumar and Mr. Natarajan.

The list is quite formidable. But the value of the collateral offered is not at all formidable – it has turned out to be not even peanut. The collateral security offered as per the information from the staff members is not worth even 5% of the loan extended. The account became NPA within 12 months or so. Rs.89.30 is a dead loss. This is not at all prudent banking by any stretch of imagination. This is clearly another fraud pulled by the unscrupulous elements in connivance with the Board. The Directors are sitting quiet as if nothing has happened. On my persistence, Mr. Krishnakumar Goyal and Milind Kale admitted that recovery, if any, cannot be more than 5%.

I may mention here that Mr. Vishwas Aagale, the Hyderabad Branch Manager of the Bank was in police custody or in hiding probably in this connection. However, Mr. Suhas Gokhale, the then Jt. MD and current Accidental MD had gone to Hyderabad personally to release him on bail.

The fact that Mr. Vishwas Aagale is still in service serves as an abundant evidence of the complicity of the Board in this fraud on depositors’ money.

The incompetence and or connivance of the RBI Inspectors and the Statutory Auditors cannot be ruled out as none of them has raised red flag and reported the matter.

The Inside Attack on the Bank going on since ages with impunity is really a matter of grave concern and reflects badly on the the Regulatory Bodies and Statutory Auditors.