Winsome Group’s Rs. 7,000-cr. default a ‘criminal conspiracy’

Documents have exposed the firm’s claims that third parties had failed to pay it

June 18, 2016 01:06 am | Updated October 18, 2016 01:14 pm IST - NEW DELHI:

Fresh details in trade circles further confirm suspicions that a criminal conspiracy to take money out of the country may have led to India’s second largest bank loan default case involving the Winsome Group’s debt of almost Rs. 7,000 crore.

The Winsome Group, involved in diamond and gold trade, through its three Dubai-based companies, has committed the second biggest bank loan default after Kingfisher Airlines.

According to Diamond Intelligence Briefing, a trade magazine, three of the Dubai-based companies that had defaulted on their payments to Winsome Group in 2012, and which, in turn, led to the group defaulting on its loans from Indian banks, have been part of the parent group for a very long time. This contradicts the group’s claim that the defaulting companies were third parties beyond its control, and thus the chain of events that set off the massive financial loss to the Indian banks was beyond the group’s control.

When T he Hindu attempted to contact Winsome group’s representatives on the numbers listed on its website, it did not receive any response.

15 PSU banks hit

According to official records of Indian banks, the Winsome Group has now accumulated defaults of almost Rs. 7000 crore on loans from a consortium of 15 public sector banks.

The Winsome Group borrowed in the name of three group companies — Rs. 4,366 crore to Winsome Diamond & Jewellers, Rs. 1,932 crore to Forever Precious Diamond and Jewellery and Rs. 283 crore to Suraj Diamonds.

From the summer of 2013, the group started defaulting on loans, and in October that year, banks notified their decision to term the group a wilful defaulter.

The Winsome Group promoter Jatin Mehta told the banks that the group’s buyers of gold and diamonds in the Gulf region had defaulted on payments, resulting in his group’s inability to repay the banks. The group’s buyers, who were third party, had suffered losses of $1 billion in derivatives and commodities trading, he claimed.

In 2014, the Central Vigilance Commission handed over the case to the CBI for criminal investigation.

Insurance exposes claim

The latest issue of Diamond Intelligence Briefing says three of the Gulf-based defaulters of the group — Italian Gold FZE, Al Mufied Jewellery FZC and Al Alam Jewellery FZE — have been insured as part of the Winsome Group for many years. Winsome Group had covered them under the ‘jewellery block policies’, as parties owned or associated with Winsome. In case of at least one company, Italian Gold, the Winsome Group insurance was in force since 2005.

The group insurance policy was issued through the Driesassur Insurance Brokers in Antwerp, Belgium, according to the publication.

“The essential news is that all the defaulters that had been in existence before 2012 were insured in the block policy by Winsome Group and then, simultaneously and mysteriously, not renewed at the renewal time. The evidence is with the insurance brokers and underwriters,” Chaim Even-Zohar, who publishes Diamond Intelligence Brief, told The Hindu, adding further details to what Indian investigators already suspect to be a criminal conspiracy.

In 2011-12, when the annual insurance policy had to be renewed, the three Gulf-based companies were removed from the policy of Winsome Group. Within a few months these companies allegedly defaulted on payments to Winsome, which in turn defaulted on payments to the Indian banks.

The Loan Default

The fresh revelations come even as the investigation agencies are struggling to crack the Winsome case for a host of reasons. What is further complicating the matter is the fact that Jatin Mehta, the group promoter, and his wife have given up Indian citizenship and become citizens of the Federation of St Kitts and Nevis after the defaults started.

According to official records submitted by Winsome to the banks, 80 per cent of its exports were to just six companies based in Sharjah, UAE. It had 13 distributors in the Middle East, of which 12 are controlled by one Haitham Sulaiman Abu Obaida. On records, Mr. Obaida owns Italian Gold FZE, which has been shown part of Winsome Group, according to insurance papers.

Of these distributors, documents show that five of them were incorporated on the same day, June 25, 2012. At least one of the banks has already reported to the CBI that it suspects that one of the distributors was not a third party, but a part of Winsome Group.

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