Bank fraud: ED slaps biggest ever FEMA notice of Rs 7,220 crore on Kolkata firm

The Enforcement Directorate (ED) has slapped its biggest ever FEMA show cause notice of Rs 7,220 crore on a Kolkata-based jewellery house for allegedly indulging in illegal foreign exchange abroad, official sources said on Monday. This is linked to a bank loan fraud case, they said.

The central probe agency has charged Shree Ganesh Jewellery House (I) Ltd and its promoters by an order issued by the adjudicating authority of the Foreign Exchange Management Act (FEMA) in Kolkata.

The authority is a special director rank officer of the ED.

The sources said the firm is among the top 100 wilful bank loan defaulters of the country, as per the Reserve Bank of India (RBI), and its three promoter brothers -- Nilesh Parekh, Umesh Parekh and Kamlesh Parekh -- are also being probed the Central Bureau of Investigation (CBI) and the Directorate of Revenue Intelligence (DRI). Nilesh Parekh was arrested by the DRI in 2018.

The ED had also filed a money laundering case against the firm and its promoters in 2018 for allegedly defrauding a consortium of 25 banks to the tune of Rs 2,672 crore by way of availing credit facilities in terms of working capital loans and discounting of export bills from 20 nationalised banks and five private banks in Kolkata.

The FEMA show cause notice has been issued after completion of an over year-long investigation and under various sections of the Forex law, the official sources said.

The company and its promoters, as per the ED, have been charged under the FEMA "for resorting to unauthorised foreign exchange dealings, holding of foreign exchange outside India and willful siphoning off a whopping amount of Rs 7,220 crore as export proceeds".

This is the highest-ever amount involved in a show cause notice issued till date by the ED under FEMA, the sources said.

The ED in its probe found that the company, Shree Ganesh Jewellery House (I) Ltd, "has huge outstanding for foreign bills drawn on Al Marhaba Trading FZC, Sparkle Jewellery LLC, UAE and Astha Jewellery LLC, UAE which are self-promoted companies".

"Bank and public funds availed by the company were ostensibly routed in the garb of export to these foreign entities and others and the proceeds against the same were parked outside India," the ED found during investigation.

A letter of request against the firm and its promoters issued by the ED is "pending" before the federal enforcement agency of Switzerland, the sources said.

The agency had earlier issued a similar show cause notice of Rs 250 crore against another company, identified as Easy Fit Jewellery Pvt Ltd, of the same businessmen.

The ED had alleged last year, after attaching Rs 175 crore worth of assets of the company, that the firm "defrauded the consortium of banks by fraudulently floating numerous companies in India and abroad and also wholly-owned subsidiaries in Dubai, Singapore and Hong Kong and purportedly made exports of gold jewellery to those related overseas entities from their manufacturing unit in Manikanchan, Kolkata".

However, it did not repatriate the sale proceeds of the exports to the bank consortium in India from where the credit facilities were availed, the agency said.