Complainant: Sanjay Kumar Tiwary, Bank of Baroda, Stressed Assets Management Branch, Fort, Mumbai. State Bank of India
Police Station: CBI, AC-V, DELHI
FIR No: RC2232023A0001 dated January 10, 2023
Section Charged: SECTION 420, 120B IPC, R/W 13(2), 13(1)(D) PREVENTION OF CORRUPTION ACT
Accused: (1) M/s Pratibha Industries Limited, (2) Mr. Ajit Bhagwan Kulkarni, (3) Mr. Ravi Kulkarni, (4) Ms. Sunanda Datta Kulkarni, (5) Sharad Prabhakar Deshpande and unknown public servant(s) and unknown private person(s)
A written complaint dated 12.09.2022 has been received from Shri Sanjay Kumar Tiwary, Deputy General Manager, Stressed Assets Management Branch, Bank of Baroda, Mumbai against the Company M/s Pratibha Industries Limited having office at Shrikant Chambers, Phase II, 5th Floor, Sion -Trombay Road, Next to R. K. Studio, Chembur, Mumbai – 400071, Maharashtra, Mr. Ajit Bhagwan Kulkarni, Director, Mr. Ravi Kulkarni, Director, Ms. Sunanda Datta Kulkarni, Director, Mr. Sharad Prabhakar Deshpande and unknown public servants and private persons, alleging therein, commission of offences of Criminal Conspiracy, Cheating, Criminal Misconduct, thereby causing wrongful loss of Rs. 4957.31 Crore (Rs. 4735.67 Crore as per Complaint made by Bank of Baroda and Rs. 221.64 Crore as per mandate dated 13.09.2022 given by SBI – one of the Consortium Member Bank) to the Consortium of Banks led by Bank of Baroda. The original complaint is enclosed with this FIR. The facts and allegations contained in the complaint disclose commission of offences punishable U/s 120-B, 420 IPC and 13(2) r/w 13(1)(d) of PC Act, 1988 by (1) M/s Pratibha Industries Limited, (2) Mr. Ajit Bhagwan Kulkarni, (3) Mr. Ravi Kulkarni, (4) Ms. Sunanda Datta Kulkarni, (5) Sharad Prabhakar Deshpande and unknown public servant(s) and unknown private person(s). A Regular Case is therefore registered and entrusted to Shri Ritesh Dangi, PI, CBI, AC-V, New Delhi for investigation and report.
Brief History: Pratibha Industries Limited was established as a partnership and converted into a public limited company incorporated on 19 July 1995. The company undertakes infrastructure projects which includes designing, engineering and execution / construction of complex & integrated water transmission & distribution projects, water treatment plants, mass housing projects, pre-cast design & construction, road construction and urban infrastructure.
The company in enjoying working capital facilities for the Infrastructure Division under consortium bank arrangement led by Bank of Baroda. The total limit sanctioned to the company under consortium is Rs.4731.00 crores, as per joint documentation dated 10/03/2017.
As per the last short review by Bank of Baroda dated 27.06.2017, Company had been enjoying a working capital limit of Rs.843.34 crores under the consortium arrangement and term loans of Rs.93.10 crore under the multiple banking arrangement.
From the year 2013-2014, the company was facing liquidity crisis resulting into returning of cheques, devolvement of LCs / invocation of bank guarantee and delayed servicing of term loans and interest. After analyzing the profitability of the Company which was adversely impacted due to severe mismatch and non-realization of receivable in time, high fixed costs and site overheads, delay in execution of projects etc.
Lenders unanimously decided to invoke SDR under the RBI guidelines with reference data as 16.06.2016. Further SDR failed as the disinvestment proposal did not materialize and due to which the account was classified as NPA on 31.12.2017 from SDR reference dated i.e. 16.06.2016. In the consortium meeting on 04.07.2018 lenders proposed initiation of recovery action and decided to file application under IBC in NCLT. On 10.09.2018 application was filed in NCLT and the case was admitted on 01.02.2019. In absence of any resolution , Liquidation application was filed, which was approved on 08.02.2021 and Mr. Anil Mehta (Ex.Resolution Professional of the Company) was appointed as Liquidator, by the Hon.NCLT.
A Joint Lenders meeting was convened on 26.10.2018 to discuss appointment of Forensic Auditor, subsequent to Bank of Maharashtra classifying the account as Red Flag. Lenders observed that Forensic Audit was previously carried out by M/s JKJS and Co, Chartered Accountant for last 3 years and the report was closed after discussions in the core committee meeting dated 24.10.2016. Based on the discussions of the JLM dated 26.10.2018, Bank of Baroda, on behalf of Consortium, assigned forensic audit in the account on 11.11.2018 to M/s BDO LLP for the further period from 01.04.2014 to 30.09.2018.
The auditor submitted the report wherein the following irregularities were observed.
Irregularities in detail: The Forensic Audit of M/s Pratibha Industries Limited was conducted by M/s BDO LLP. The following irregularities were observed.
1. Overbooking of Revenue, Work in Progress and Claims:
a) It was observed in three projects that excess revenue of Rs.83 crores were booked as per record vis a vis client certification.
b) Work in Progress (WIP) booked under different projects during the period from March 2015 to March 2017 was not converted into revenue in subsequent financial years. The Company could not provide documentation to substantiate the amount booked under WIP. A review of top 15 projects indicated excess booking of revenue of Rs.250 crore in March 2015, Rs.774 Crore in March 2016 and Rs.460 Crore in March 2017.
c) On review of sample projects, it was noted that, the income booked as per SAP was more than the income booked in Running Account (RA) bills, as the trading income was booked in the profit center of project income.
d) In five projects, it was obversed that claims were overstated in FY 2016-17 which were subsequently rectified in later years.
Inference: The above transactions indicate misrepresentation in the books of accounts by way of inflating revenue. Further, it indicates that, the Company reflected inflated WIP apparently for drawing powers.
2. Potential Non-recovery of loans and advances to subsidiaries and associate company.
a) It was observed that the vendor liability were directly adjusted against the customer account (Rs.238.59 crores). The Company could not provide supporting documents for the same.
b) During the review period, PIL has outstanding loans and advances receivable from subsidiaries and associate companies amounted to INR 182.20 crores. It was noted that, the networth of the subsidiary and associate companies were fully eroded as per the latest financials available (2015-16).
c) For loans amounting to INR 109.06 crores granted to Prime Infra Park and Bhopal Sanchi during review period, the networth of these companies were negative / minimal as on 31st March 2014. However, additional amount of Rs.109.06 Crores was granted to the company.
d) Conversion of advances receivables to investments, Trade Receivables balance as on 31.03.2017 from Pratibha FEMC Joint Venture of Rs.228.45 crores was converted to investments made in joint venture. Interest free loans and advances to Joint Ventures in the books of Pratibha Industries Limited aggregating to Rs.1473 crores converted into investments made in JVs.
Inference: The above transactions indicate misrepresentation of books of accounts.
3. Trading Transactions: Company has dealt in trading activity for HR Steel Plate, Bar TMT, MS Pipe and Steel Rods etc.
a) The Company could not provide adequate documentation and linkages to ascertain the veracity of sales/purchases pertaining to the trading activity.
b) In review of trading sales of INR 4103 crores, the resultant bank receipts were Rs.3932 crores, remaining balance of Rs.172 Crores were either written off or adjusted against the books of PIL.
c) Site visits at the registered addresses of the 15 trading entities did not indicate similar business activity, existence, scale of business as compared to transactions with PIL.
Inference: The above observation indicate fraudulent trading transactions
4.Unexplained write off:
a) Inadequate explanation and documentation for write offs amounting to Rs.428.95 crores and write back of Rs.215 crores
5.,Other disprepant observations are as under but not limited to:
a) Inadequate explanation and documentation for write offs amounting to Rs.428.95 crores and write back of Rs.215.20 crores
b)Net amounts written off in related party account in the books amounting to Rs.148 crores.
Modus Operandi:
1. Borrower Company has booked excess revenue of Rs.83 Crores as per SAP records vis a vis the client certification, WIP booked, under different projects were not converted into revenue in subsequent financial years. Trading income was booked in profit centre of project income of RS.266.50 crores. Further, Rs.207 crores were claimed by the company but no court order were awarded in favor of the Company. In five projects the company had overstated the claims, however, the same were subsequently rectified. Based on the above findings, the auditor opined that that company had misrepresented / manipulated books of accounts by way of inflating revenue and reflected inflated WIP for obtaining higher drawing power.
2.It was observed that the Vendor’s liability were directly adjusted against the customer account of Rs.238.59 crores. However, no supporting documents were provided to auditor to support the same.
3.Interest free loans and advances to Joint Ventures in the books of PIL aggregating to Rs.1473 crores were converted to investment made in JVs with no adequate reasoning provided by the management.
4.PIL extended loans to its subsidiaries and associates for Rs.182.20 crores which is doubtful for recovery as the net worth of the debtors companies now eroded.
5.Companies has not disclosed the transaction of Rs.8.45 crore with its key management personnel in its Audited financial statement leading to non compliance with disclosure rules.
6.Trading Sale and Purchases booked by PIL amounting to Rs.4103 crore (Trading Sale) and Rs.3935.00 crore (Trading Purchase). However, no supporting documents were provided to auditor to substantiate the actual movement of the goods in these transactions. In absence of adequate documentation, the auditor could not ascertain the veracity of these sales/purchases pertaining to the trading activity. Also, during site visits at the registered addresses of 15 trading entities, did not indicate the similar business activities, existence, scale of business as compared to transactions with PIL. Thus, the transaction shown by the company seems to be suspicious.