'Rs 6,000-cr fraud case by Sandesara Group was daylight robbery': Nitin, Chetan Sandesara spun web to funnel illegal funds from India to Nigeria

New Delhi: The Appellate Tribunal, which works under the department of revenue, has termed the Sandesara Group fraud against the public sector banks as ‘daylight robbery’ seeking stringent action in the case. Sandesara brothers — Nitin and Chetan Sandesara, owners of Sandesara group of companies and now officially designated economic offenders — swindled at least Rs 6,000 crore from state-owned banks before fleeing the country.

“They, after looting huge amounts from the banks, have left the country and investigation against them (Sandesara brothers) is still underway. Stringent and shocked action should be taken against them who are enjoying the lavish life in foreign countries by cheating the public amount,” the tribunal observed.

The tribunal, while allowing corporate insolvency resolution process under the provisions of the Insolvency and Bankruptcy Code 2016 (IBC), said that the agencies are clueless whether Sandesara bothers will ever return to face the law. The group had taken the loans from various banks, including Dena Bank, Oriental Bank of Commerce and Federal Bank. The tribunal said that large number of properties have been mortgaged with the banks and money must go to them.

Sandesara Group’s initial operations were limited to trading, tea business and machine tools. Later, the group started to diversify their operations into mines, infrastructure development in SEZ and ports, etc within the country. Sterling Biotech Ltd (SBL) is a flagship company of the group. It was started in 1985 as ‘Pluto Exports & Consultants Ltd’. In 1991, it diversified into the tea plantation business and changed its name to Sterling Tea and Industries Ltd. In 1995, the company entered into a technical tie-up with Croda Colloids Ltd, a gelatin manufacturer which was based in the UK, and in 1997, first gelatin production facility at Karakhadi in Gujarat was commissioned. In 2000, tea business was sold off and from 29 March, 2001 it changed its name to Sterling Biotech Limited.

Subsequently, other companies like Sterling International Enterprises Limited , Sterling Oil Resources Limited, PMT Machines Limited, Sterling SEZ & Infrastructure Limited, Sterling Port Limited and Sterling Healthcare Private Limited were floated by the promoters. The Sandesara Group entered into oil production operations in Nigeria in 2005 and thereafter, the main focus of the operation seems to have shifted to offshore oil exploration business.

Almost all the Indian companies of the group, irrespective of their main area of operation, appear to have developed association with the Nigerian operations by creating offshore subsidiaries. In particular, through two of its Indian companies (Sterling International Enterprises Ltd and Sterling Oil Resources Ltd) the entire Nigerian operations are funded and managed by the group through layers of subsidiaries and step down subsidiaries in BVI, Mauritius, Nigeria and UAE. Sandesara group floated More than 151 benami entities wherein the employees and key persons were shown as shareholders and directors.

The documents available with Enforcement Directorate (ED) suggested that about 100 undisclosed offshore entities were incorporated in BVI, Seychelles, Liechtenstein, Cayman Islands, Mauritius and UAE with Nitin Sandesara and Chetan Sandesara mentioned as the beneficial owners. One of the major methods by which the Sandesara Group was diverting funds, investigation revealed, was through booking of bogus purchase of goods and capital assets. Just as there was a phenomenal increase in turnover of the company due to its systematic manipulative methods, the funds deployed in the group also increased substantially.

Substantial funds were raised by way of bank loans also citing various projects of the group both in India and abroad, particularly Nigeria. The money infused into the business of the group was simultaneously being withdrawn through booking of bogus capital assets for which purpose the loans were mainly obtained. Creation of more than 151 benami entities in India and the presence of over 100 undisclosed offshore entities acted as an effective smoke screen to funnel the funds without raising any alarm.

Investigators said most of the benami entities in India are only on paper and have no real business. Still crores of rupees have been routed through them under the cloak of suppliers of machineries and service providers.

“Just like the creation of super profits, the corresponding increase in fixed assets was also only on paper. This bogus purchase of fixed assets had helped in accounting for the borrowed funds without having to actually use them for the stated purpose and also in nullifying the tax incidence on the abnormal profits that the company has shown year after year,” investigators said further adding that the increase in fixed assets of the group as a whole has been manipulated as a matter of routine and almost the entire addition to fixed assets running to thousands of crores was found to have been shown as purchased from the benami companies only.

Even in the Nigerian entities, almost the entire expenses are booked in the name of the undisclosed offshore companies only, making it a myriad web through which funds are funneled. These entities being used to book expenses in Nigeria are undisclosed offshore companies and most of them are found to be owned by Nitin Sandesara and his relatives. Entities with similar names have been incorporated in different countries under different ownership, thereby making it difficult for the investigators to follow the funds trail.

“The present case is a classic example as to how the public money has been swindled by these groups and individuals. No one knows when enquired why they have left the country and how they have managed to flee recently in pending investigation by various agencies, no one is aware whether they will ever return to home country and pay their debts, every one appearing is clueless on this question,” tribunal said.