How Vadodara Became a Hotbed of Financial Scams & Rackets

The Quint lists out a range of such scams that has its roots in Vadodara, Gujarat

In the last few years Vadodara has been the hub for financial frauds 

(Photo Courtesy: localguidesconnect.com)

Vadodara in Gujarat is also called as ‘Sanskaari Nagari’ or the Cultured city, as much of Gujarat’s history and heritage finds its roots here.

But of late, the city is also shaping up to be a hot bed for scamsters who have allegedly resorted to financial fraud, which in some cases are to the tune of thousands of crores of rupees. These cases pertain to bank frauds where companies have duped loan syndicates and misappropriated the funds and rackets carried out in public works and infra development projects.

Incidentally, it is speculated that big ticket economic frauds have links with national-level political parties, while the other rackets are rooted in corruption and apathy at the civic body level

The Quint lists out a range of such scams that has its roots in Vadodara.

Sandesara Brother & The Sterling Group

One of Sterling Biotech units in the outskirts of Vadodara(Photo Courtesy: Twitter/@amruthasuri)

The brothers Chetan and Nitin Sandesara of the Sterling Group (which includes Sterling Biotech, Sterling SEZ and Sterling International) were the toast of Vadodara city as they were famous in the city for organising massive Garba events during Navratri.

However, the brothers, who are the promoters and directors of the company, fled the country to Nigeria in early 2017 before any criminal probe was launched against them in a Rs 8,100 crore bank loan fraud involving a consortium of banks, led by Andhra bank.

The Enforcement Directorate (ED) filed a plea before a special court of the Prevention of Money Laundering Act (PMLA), seeking to declare Nitin Sandesara, Chetan Sandesara, Dipti Sandesara and Hitesh Patel fugitives under Section 4 of the Fugitive Economic Offenders Act.

Sterling Group and its promoters laundered funds obtained through bank loans by “incorporating” shell or dummy companies, conducting circular transactions to artificially inflate turnover of flagship companies, claiming higher depreciation on non-existing machinery, artificial share trading with the use of shell companies and layering and laundering of proceeds of crime within India and abroad through the web of shell companies.

Hitesh Patel was arrested in Albania on 22 March after a red corner notice was issued against him by the Interpol on 11 March. The ED said Patel was instrumental in getting dummy directors for shell companies used by Sandesaras, reported PTI. Nitin and Chetan are currently in Albania.

During investigation, it was revealed that the Sandesara brothers handed large sums of cash to Rajya Sabha member and senior Congress leader Ahmed Patel’s son in law Irfan Siddiqui.

DPIL and the Bhatnagar Brothers

Amit Bhatnagar (right) with PM Narendra Modi (left) and BJP leader Saurabh Patel (centre). (Photo Courtesy: Amit Bhatnagar/Facebook)

Next on the list are the Bhatnagar brothers – Amit and Sumit – along with their father Suresh Bhatnagar who ran the company Diamond Power Infrastructure Limited (DPIL). Just like the Sandesaras, the Bhatnagars too, were big in Vadodara, thanks to the various social initiatives and events organised by them including the Vadodara Marathon and VadFest.

On 5 April 2018, the CBI lodged an FIR in Gandhinagar, DPIL and its directors for allegedly duping 11 banks to the tune of Rs 2,654 crore. The consortium sanctioned credit limits to DPIL, albeit they were mentioned in the Reserve Bank of India’s defaulters list and Export Credit Guarantee Corporation (ECGC) caution list.

On 27 December 2018, the ED filed a charge sheet under section 4 of the PMLA for the confiscation of attached assets as punishment for the directors of DIPL and other accused persons involved in the case.

Suresh Bhatnagar is out on bail whereas his son Sumit Bhatnagar was given temporary bail on 14 May, for four weeks, to help his dyslexic daughter attend counselling sessions for selecting subjects for class XI which requires his presence. Amit Bhatnagar is still behind bars.

Amit Bhatnagar was a close aide of Gujarat cabinet minister Saurabh Patel and also managed his social media pages.

Manpasand Beverages Limited

The company’s MD, his brother and the CFO are in Judicial Custody(Photo Courtesy: manpasand.co.in)

The latest entrant in the list of scamsters originating from Vadodara is Manpasand Beverages Limited (MBL), whose Managing Director Abhishek Singh, his brother Harshvardhan Singh and the company’s Chief Financial Officer Paresh Thakkar were arrested for evading GST to the tune of Rs 40 crore. The trio have been sent to judicial custody.

Meanwhile, the company's independent directors Bharat Vyas and Milind Babar, along with director Dhruv Agrawal and non-executive director Vishal Sood have tendered their resignation. The company told BSE that Vyas resigned due to "pre-occupation", while resignation of others is "mainly due to GST search."

According to the statement released by CGST Commissionerate, the company ran fake units to fraudulently avail Input Tax Credit (ITC), thereby committing tax evasion to the tune of Rs 40 crore over a turnover of Rs 300 crore.

Meanwhile, shares of Manpasand Beverages on Tuesday, 28 May, hit the lower circuit limit for the second day in a row. On the Bombay Stock Exchange (BSE), shares of the company plunged 20 percent to lock in at its lower circuit limit of Rs 70.40. The National Stock Exchange (NSE) saw the scrip tumble 19.98 percent to touch the lower circuit of Rs 70.50.

On Monday, 27 May, the scrip dived 20 percent to close at Rs 88 on the BSE.

Dabba Trading Scam

XDirect facilitated trading of foreign exchange without taking any permission from Securities and Exchange Board of India (SEBI), or the Reserve Bank of India (RBI)(Photo: Reuters)

'Dabba' means box and a dabba operator, in stock market terminology, is the one who indulges in dabba trading. The dabba operator's office is like any other broker's office having terminals linked to the stock exchange showing market rates of stocks.

Unlike the main market trade, which now happens online, dabba trading takes place in office, and since it leaves no record, except in the book of the illegal operator, both the buyers and sellers better their margins as they can easily evade any regulatory tax.

On 1 January, 2016, Vadodara police have busted a racket allegedly running the illegal 'dabba trading' in foreign currencies with the arrest of Prathamesh Pandya and Gunjan Patil. Both were working as manager and employee, respectively, for a company called XDirect.

XDirect is registered in Mauritius and its India headquarters is based in Mumbai. The company prima facie facilitated trading of foreign exchange without taking any permission from SEBI and Reserve Bank. The duo were booked for cheating under relevant sections of the Security Exchange Act and also under IT Act.

XDirect's modus operandi was to lure customers to deposit a sum of Rs 35,000 after which they were given access to a software called 'MT4' specially designed to trade in foreign currencies. The customers would be allowed to trade according to the amount of money they deposited, and they were promised quick returns in short time. The company took commission from the volume of trade as also from the customer.

Kemrock Industries Scam

Reliance Industries Ltd (RIL) bought out Kemrock for an undisclosed amount in 2017(File Photo: IANS)

The ED on 24 July 2014 filed a money laundering case against Kemrock Industries and Exports Private Limited for siphoning Rs 140 crore from ICICI Bank. The company took a loan between 2007 and 2011 but didn’t repay the money. The bank found out that the company had given Rs 142 crore to Kemrock (UK), but no entry was made in the balance sheet.

To top it off, the working capital loan was also misused by the company who claimed to have sold products worth Rs 303 crore to 40 companies, which later turned out to be bogus.

Three years later on 6 September 2017, Reliance Industries acquired assets of Kemrock Industries and Exports Ltd for an undisclosed sum.

Topline Shoes Scam

Sunil Gavaskar was one of the directors of Topline Shoes (Photo: Reuters)

Topline Shoes hit the headlines around 15 years ago after and FIR was filed by Registrar of Companies (RoC) in Vadodara in July, 2004.

The company floated public issue of 46.5 lakh shares raising Rs 4.65 crore. The RoC had alleged the company’s MD and five directors including former Indian cricketer Sunil Gavaskar, H M B Murthy, Duleep Singh, Vinod B Mistry and Arun L Kapani of duping Rs 4.64 crore through a public issue.

Gavaskar was questioned by Vadodara police in March 2013. He stated that he was only part of the company as a goodwill gesture and that he had quit the company in 1994 after he was appointed as Sheriff of Mumbai.

The company stopped filing its results with bourses and SEBI from 1991-2000 following which the company was finally delisted from Bombay Stock Exchange and National Stock Exchange in 2001.

IPO Scam

Bombay Stock Exchange. (File Photo: IANS)

On 27 April 2015, 122 ‘vanishing companies’ listed on the Vadodara Stock Exchange were added to the dissemination board of the Bombay Stock Exchange.

The BSE dissemination board is an information disseminating mechanism on the bourse’s website for buyers and sellers of companies, which are listed exclusively on exiting or de-recognised Regional Stock Exchanges (RSEs) and have failed to obtain listing on any RSE.

Shares of these firms, however, will not be available for buying and selling. These companies issued Initial Public Offerings to investors in Vadodara Stock Exchange.

However, once the money came into the corpus, the companies simply vanished with the investors’ money. These companies include Addi Commercial Enterprises, Anand Dairy, Baroda Dying, Gujarat Apparels, Zen Shaving and Rainbow Housing Development Corp.

Answer Sheet Scam

some answer sheets of students of first-year Bachelor of Arts, missing at MSU(Photo Courtesy: www.msubaroda.ac.in)

Vadodara’s world famous Maharaja Sayajirao University was rocked by controversy after authorities found some answer sheets of students of first-year Bachelor of Arts, missing.

Incidentally, peons posted at the Central Assessment Cell of the university were caught red-handed stealing and replacing answer sheets of students who had just finished writing the semester 1 and 2 examinations of the Faculty of Arts.

Exams were held between 1 and 20 April and discrepancies were observed in the tally of answer sheets, by the evaluators. The papers smuggled include Economics, Archaeology, History, English, Foreign Languages, Political Science and Sociology, and 36 students answer sheets were reported missing.

Eventually, on 19 May, two peons and 12 students were booked and detained by the police.

IPL Betting Scam

File Photo: 19 persons were arrested in Vadodara after a betting racket was unearthed in April this year(Photo Courtesy: Twitter)

In April this year, when the Indian Premier League was held across the country a betting racket was unearthed in Vadodara. In all, 19 persons were arrested including former Indian Women’s Cricket coach, Tushar Arothe. The accused had gathered at Arothe’s son, Rishi’s café.

A few days later, cops arrested one of the key accused Raza Yunus Shaikh alias Baba. Baba is a bookie based in Vadodara who had close connections with the city’s biggest bookie, Akku Patel. Akku accepted bets from Baba and paid him the money.

However, the police are yet to nab Akku.

Door-To-Door Garbage Collection Scam

File Photo: Agencies outsourced by Vadodara’s civic body brought in rocks and sand to the weighing scales instead of garbage(Photo: PTI)

Corruption in the city has trickled down to the lowest rungs as yet another baffling racket surfaced in Vadodara in 2015. The Vadodara Municipal Corporation had employed a few private agencies to collect garbage from door-to-door across the city.

However, some agencies, instead of collecting garbage, brought in rocks and sand on the weighing scales and made money, until the civic body busted their racket.

Cryptocurrency Scam

The lure of cryptocurrencies has given rise to scamsters looking to make a quick buck. (Photo: istockphoto)

Four persons were arrested in November last year for their alleged involvement in duping investors to the tune of Rs 17.18 lakh. The men claimed that they have little to no role in the racket and that the mastermind behind the whole business idea was one, Pravin Patel.

Patel had started Pay Way cryptocurrency in Ahmedabad and gathered investors to grow the business. However, after the RBI stated that cryptocurrency is not a valid tender of exchange, Patel panicked and shut down his company. He then proceeded to start a new venture, Brio Hydroponics, which claimed to be involved in manufacturing Aloe Vera products.

After Pravin refused to return the money to investors, a case was lodged at the Cyber-Crime Branch in the city. Pravin Patel is still on the run.

Sewage Pump Scam

File Photo: CETP discharging treated sewage(Photo Courtesy: Vivian Fernandes)

If the garbage collection scam didn’t sully the Vadodara Municpal Corporation enough, another racket hit the civic body after questions were raised on the capacity of the sewage pumps used in the city.

When members of the civic body’s standing committee conducted a routine inspection, it came to light that instead of using a 1,900 CMH ( Cubic Meters Per Hour) Pump, an 1,100 CMH pump was put into use. The contractor, however, has claimed that third party inspections were carried out on site and had approved the pumps.

The civic body decided to call in experts to determine whether a scam is at play or not and the matter continues to remain unsolved.