Dairy Maker Kwality Charged with Rs. 1,400 Crore Bank Loan Fraud by CBI

Dairy product maker Kwality Limited has been charged with cheating a group of banks of Rs. 1,400 crore in a case of fraud filed by the Central Bureau of Investigation (CBI).

The CBI filed the case after searches at eight locations including Delhi. Those accused by the CBI include Kwality's directors Sanjay Dhingra, Siddhant Gupta and Arun Srivastava on charges of cheating, forgery, criminal conspiracy and corruption.

A complaint was raised by Bank of India alleging that Kwality Ltd had taken credit from the bank since 2010 but started defaulting on payments in early 2018. The account was classified as a non-performing asset (NPA) in August 2018, it said.

The CBI thereafter started its investigations on Kwality Limited and said that Kwality is accused of cheating the banks by "diversion of bank funds, sham transactions with related parties, fabricated documents or receipts and falsified books of accounts" and creating false assets and liabilities.

In its complaint, the bank has stated that the forensic audit of the accounts showed that out of the total sale of Rs. 13,147.25 crore made by the company, only Rs. 7,107.23 crore were routed through the consortium of banks. Kwality allegedly overstated its financial statements by bloating its business operations and indulged in manipulation of accounts by making reverse entries.

It has also been alleged in the complaint that the said accused had cheated the Bank of India-led consortium comprising Bank of India, Canara Bank, Bank of Baroda, Andhra Bank, Corporation Bank, IDBI, Central Bank of India, Dhanalaxmi Bank, Syndicate Bank to the tune of Rs. 1400.62 core, according to CBI.

Besides Delhi, the CBI also carried out searches in Saharanpur and Bulandshahr in Uttar Pradesh, Ajmer in Rajasthan and Palwal in Haryana

Kwality Ltd has been facing insolvency proceedings since December 2018. It owes around Rs. 1,900 crore to creditors. The company was dragged to bankruptcy court by global equity giant KKR. In 2016, Kwality had raised Rs. 520 crore from KKR India Financial Services through a structured finance transaction.