Auditors culpable in Kanishk ₹824 crore fraud case: SBI
Overstated Gold Inventroy For More Loans
Rachel.Chitra@timesgroup.com 22.03.2018
Chennai: In the ₹824 crore jewellery chain Kanishk Gold Pvt Ltd fraud, State Bank of India has alleged that the auditors colluded with the management to overstate the gold inventory for more loans.
One interesting instance was in March 2015 when the jeweller jacked up the market price of gold by 25% to artificially inflate the stock value. “On March 31, 2015 they said they had 627kg of gold amounting to ₹165.94 crore. On April 1, 2015, however, they had finished goods of only 517.53kg. Now that’s 110kg of gold — which is unaccounted for. To make up this difference, the auditors said the going rate of gold as on April 1, 2015 was ₹3,206.44/gm (an inflated figure, when the market rate was at ₹2,644.39/gm) and they had ₹165.94 crore worth of stock (the same stock value declared on March 31 without disclosing the quantity details),” said an SBI official.
“We found many other frauds in inventory, accounting and diversion of funds, which could not have happened without the active collusion of the auditors,” said the official. SBI is the lead bank in a consortium of 14 lenders, who lent the jeweller up to ₹824.15 crore in working capital and current account loans. “We have asked for CBI to initiate criminal investigations against promoters and auditors. The auditors also at one point stopped cooperating with us and did not take our calls,” said an SBI official.
In a letter to CBI, SBI has asked for registering a criminal case against Kanishk promoters Bhoopesh and Neeta Jain and their auditors — Tejraj Achha, partner of Achha Associates, Ajay Kumar Jain, partner, Ajay & Co Chartered Accountants and Sumit Kedia of A K Lunawath & Associates.
In March 2017, Kanishk first defaulted on its loans from eight banks. By April 2017 it stopped repayments to all 14 banks. An audit by the banks in May revealed that the promoters had shut down Kanishk’s T Nagar showroom, head office and factory units. In July, the banks hired Deloitte to conduct a forensic audit. In September, Bhoopesh Jain was arrested for tax evasion to the tune of ₹20 crore and was remanded in 14 days judicial custody. The forensic audit by Deloitte revealed that their accounting books contradicted the sales recorded in their stock valuation books, the SBI official said.
“Kanishk’s sales records for the year 2014-15 and 2015-16 show anomalies. In one book, they have shown closing stock of 627kg, indicating sales of 6,208.52kg. But in another place, they have accounted closing stock of 517.53kg for the same period, indicating sales of 6,318.52kg. But the sales they have shown is not the figure, they have put a baffling figure of 6,227.99 kg,” said the official.
SBI’s letter to CBI also states that Kanishk diverted funds. “About ₹190.21crore was diverted to other bank accounts....and payments were made to a shell company called Tatia Global Venture Ltd. The vouchers show the payments were made to the shell company even as the bank account statements show the payments were made to Bhoopesh Jain...such irregularities were noted in receipt vouchers amounting to ₹41.22 crore from March 2014-October 2016,” said SBI in its letter.
The forensic audit also found no stock audit was carried out at the end of every financial year. SBI has concluded that Kanishk and its directors colluded with their auditors “with a clear criminal and malafide intent to cheat and defraud the banks and to gain illegal profit has been misrepresenting and falsifying records.”
Overstated Gold Inventroy For More Loans
Rachel.Chitra@timesgroup.com 22.03.2018
Chennai: In the ₹824 crore jewellery chain Kanishk Gold Pvt Ltd fraud, State Bank of India has alleged that the auditors colluded with the management to overstate the gold inventory for more loans.
One interesting instance was in March 2015 when the jeweller jacked up the market price of gold by 25% to artificially inflate the stock value. “On March 31, 2015 they said they had 627kg of gold amounting to ₹165.94 crore. On April 1, 2015, however, they had finished goods of only 517.53kg. Now that’s 110kg of gold — which is unaccounted for. To make up this difference, the auditors said the going rate of gold as on April 1, 2015 was ₹3,206.44/gm (an inflated figure, when the market rate was at ₹2,644.39/gm) and they had ₹165.94 crore worth of stock (the same stock value declared on March 31 without disclosing the quantity details),” said an SBI official.
“We found many other frauds in inventory, accounting and diversion of funds, which could not have happened without the active collusion of the auditors,” said the official. SBI is the lead bank in a consortium of 14 lenders, who lent the jeweller up to ₹824.15 crore in working capital and current account loans. “We have asked for CBI to initiate criminal investigations against promoters and auditors. The auditors also at one point stopped cooperating with us and did not take our calls,” said an SBI official.
In a letter to CBI, SBI has asked for registering a criminal case against Kanishk promoters Bhoopesh and Neeta Jain and their auditors — Tejraj Achha, partner of Achha Associates, Ajay Kumar Jain, partner, Ajay & Co Chartered Accountants and Sumit Kedia of A K Lunawath & Associates.
In March 2017, Kanishk first defaulted on its loans from eight banks. By April 2017 it stopped repayments to all 14 banks. An audit by the banks in May revealed that the promoters had shut down Kanishk’s T Nagar showroom, head office and factory units. In July, the banks hired Deloitte to conduct a forensic audit. In September, Bhoopesh Jain was arrested for tax evasion to the tune of ₹20 crore and was remanded in 14 days judicial custody. The forensic audit by Deloitte revealed that their accounting books contradicted the sales recorded in their stock valuation books, the SBI official said.
“Kanishk’s sales records for the year 2014-15 and 2015-16 show anomalies. In one book, they have shown closing stock of 627kg, indicating sales of 6,208.52kg. But in another place, they have accounted closing stock of 517.53kg for the same period, indicating sales of 6,318.52kg. But the sales they have shown is not the figure, they have put a baffling figure of 6,227.99 kg,” said the official.
SBI’s letter to CBI also states that Kanishk diverted funds. “About ₹190.21crore was diverted to other bank accounts....and payments were made to a shell company called Tatia Global Venture Ltd. The vouchers show the payments were made to the shell company even as the bank account statements show the payments were made to Bhoopesh Jain...such irregularities were noted in receipt vouchers amounting to ₹41.22 crore from March 2014-October 2016,” said SBI in its letter.
The forensic audit also found no stock audit was carried out at the end of every financial year. SBI has concluded that Kanishk and its directors colluded with their auditors “with a clear criminal and malafide intent to cheat and defraud the banks and to gain illegal profit has been misrepresenting and falsifying records.”
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