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Adarsh Coop scam accused says used loan to buy Rs 225 cr fabric

The Serious Fraud Investigation Office (SFIO) revealed in its report that the Ahmedabad-based Adarsh Credit Cooperative Society had purchased fabric worth Rs 225 crore for suits. The SFIO is probing into the alleged Rs 9000 crore scandal, involvin...

, ET Bureau|
Nov 20, 2019, 07.05 AM IST
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New Delhi: Purchased fabric worth Rs 225 crore for suits — this was the explanation given by an accused in the Adarsh Credit Cooperative Society embezzlement case on the utilisation of a loan.

The Serious Fraud Investigation Office (SFIO) has revealed this in its report on the probe into the alleged Rs 9,000 crore scandal, involving the Ahmedabad-based cooperative society controlled by Mukesh Modi and his family.

The family has claimed to have spent Rs 225 crore in three months to purchase the fabric. To justify the claim, the accused produced invoices and documents of trucks which purportedly ferried the fabric.

The SFIO in its report said it had found out that all these invoices and documents were forged, and that the money was utilised for personal gains.

The Modi family had set up the cooperative society with a stated primary aim of catering to the masses in Rajasthan. It had more than 800 branches, 20 lakh members, 3.7 lakh investors and Rs 9,253 crore of deposits as of May last year, according to the SFIO. Most of its senior positions were held by either Mukesh Modi or his family members and associates.

As many as 126 companies allegedly directly and indirectly controlled by Mukesh Modi and his family took thousands of crores of unsecured loans from the society and utilised the money for personal gains, the SFIO has alleged in its report, seen by ET.

When confronted over one such loan, which wasn’t returned to the society, Mukesh Modi’s nephew, Rahul Modi, claimed that the money was used for the purchase of suit fabric from one Mumbai-based Jainam Rathod.

Mukesh Modi and his nephew were arrested in June last year and are currently in jail in judicial custody. The family has denied all the accusations.

In his interrogation, Rathod had revealed that he provided “accommodation entries” worth about ?225 crore, the probe agency said. Rathod further said, as per the SFIO, that he “forged the invoices, lorry receipts and the total amount of suits sold was shown to be ?225 crore”. In lieu of this, Rathod was allegedly paid a commission of ?22.5 lakh — 0.1% of ?225 crore.

The transport companies named in the documents furnished by the accused denied ferrying any suits to Modi’s family or company, the SFIO has said.

According to the SFIO, taking loans from the society was nothing but a “selfserving exercise and through this process” unsecured loans of thousands of crores were taken by the Modi family but those were never returned.

It has also said the family “used an abusive process which lacked any due diligence and which was also in violation of provisions of the Multi State Cooperative Society Act, which forbids a company to become a member of a society”.

To take loans, the Modi family allegedly projected unverified, baseless and fraudulent financials without any specific repayment schedule with no physical verification of the properties pledged and no viability report, the SFIO has claimed. The loans were taken in the garb of purchase of lands and other development agreements.

The agency has also alleged that in a majority of the cases “neither the land was purchased” nor the money was returned to the society. The SFIO has also booked the statutory auditor, who was allegedly paid money for not disclosing the affairs of AGCL.
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