India Markets open in 3 hrs 45 mins

In the hunt for Nirav Modi, ED tracks down Pramod Mittal, accused of defrauding STC to the tune of Rs 2,112 cr

Yatish Yadav

New Delhi: The Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI) are hot on the trail of Pramod Kumar Mittal. The investigating agencies alleged that Mittal defrauded government-owned State Trading Corporation of India Limited (STC) to the tune of Rs 2,112 crore. The ED officials said that while tracking whereabouts of Nirav Modi, they have zeroed in on Mittal's London address and they will soon expedite the case to bring him back to India.

"So far, we had issued three summons to Pramod Mittal after CBI had registered a case against him and other officers of STC. We had attached his assets worth around Rs 244 crore last years (sic). Although a look out circular has been issued against him, we will coordinate with the CBI for issuance of Red Corner Notice against Mittal," an ED official said.

File image of Pramod Mittal. Reuters

File image of Pramod Mittal. Reuters

The CBI had registered a case against Mittal and 19 officers of STC for criminal conspiracy and cheating in March 2017. Subsequently, ED had registered a case under Prevention of Money Laundering Act (PMLA). Both the agencies had issued summons to Mittal, younger brother of steel tycoon Lakshmi Mittal, but he has not appeared before the sleuths for examination. There were reports in 2013 that Pramod Mittal spent a whopping Rs 500 crore on his daughter's wedding in Barcelona.

The CBI has alleged that Mittal's company Global Infrastructure Holdings Limited (GIHL), registered in Isle of Man, now also known as Global Steel Holdings Limited (GSHL), approached STC and sought assistance in terms of providing financing facility by establishing Letters of Credit for purchasing raw materials required for their newly acquired steel plants in Philippines and Bosnia.

Then, the Indian Ambassador to Philippines suggested to STC that the Embassy was not in a position to comment on the financial aspects and liabilities of the company and had advised to ensure thorough enquiries to protect STC's interests. This warning was ignored by STC officials, facing the CBI heat, and a proposal for financing the agreement with Mittal's company was cleared. Officials from STC €" BD Majumdar, then General Manager, KK Sood, then Director Marketing and Vijay Krishan, then Director Finance €" put up the proposal before the Committee of Management (comprising Dr Arvind Pandalai, the then Chairman and Managing Director) in its 225th meeting held on 7 January 2005 and directed to place the proposal before the board of directors for approval.

The CBI has alleged that a board note was prepared by Sood. However, the board was not apprised about the extant Reserve Bank of India (RBI) guidelines regarding merchanting and intermediate trade transactions.

The CBI further noted: "The board on 27.01.2005 in its 532nd meeting accorded approval in principle to the third country transactions and also authorized CMD (named in FIR) to exercise all powers including that of board, if required, for smooth implementation/functioning of the project in the best interest of the corporation. The board also authorized CMD to delegate powers to the concerned Director/CGM required for day to day functioning of the project."

The agreement was finally signed in April 2005. Subsequently, an amendment was made in the original agreement in September 2005 which allowed more time to the company to pay back but exposed STC to financial risk. CBI said that since payment was linked to the disposal of the finished goods, STC funds got blocked.

"As a result of revised system of payment, the associate (GSPI and GSHL) got easy money for longer period to fund their operations with no pressure to repay STC dues. Since April 2005 a total 80 Letter of Credits (LC) were opened by STC in favour of suppliers. The first LC number 5174 valued at US $7383872 was opened on 09.06.2005 and the last LC was opened on May 2010. The STC officials in conspiracy with GSPI and GSHL representatives opened fresh LCs despite the fact that outstanding amount was increasing every year due to default in payment. Due to changes in market conditions/global meltdown the plant operations of GSPI were shutdown in 2008. There was an outstanding of Rs 729 Crores as on 31st March 2009. However, ignoring the fact that outstanding amount was not being paid by the GSPI and market was very volatile, STC officials in conspiracy with GSPI representatives proceeded to make further funding in May 2009 and continued till May 2010, thus exposing STC to further financial risk," CBI has alleged.

CBI claims Mittal in September 2011 wrote to NK Mathur, then CMD of STC, and offered conciliation process to determine the mode of payment, time frame, schedule, qualification of interest amount and the mode of securing the payment due.

"At the time of conciliation agreement on 15th November 2011, Pramod Mittal Chairman of GSPI and GSHL gave personal guarantee and also gave an undertaking that he would not transfer, sell and mortgage his investment in JSW Ispat Steel Limited as security totaling $38,96,27,333. However, BD Majumdar, then CGM STC in conspiracy with GSPI, GSHL did not take action to securitize the securities in favour of STC. Subsequently, Pramod Mittal cheated STC as he diluted the securities by transferring/selling them without STC knowledge for which the matter is pending before the court," CBI said.

The agency also charged the STC officials, alleging that they connived with Mittal's company to misappropriate stocks at the project site. The tried to execute a 'Further Settlement Agreement' in May 2012. In November 2012, the total outstanding amount against GSPI and GSHL was $371 million. But the cheques bounced.

"Pramod Mittal committed breach of trust as he failed to make payment to STC as per terms of agreement accepted and signed by them. The cheques given by GSHL and GSPI against the outstanding dues were dishonored for which the matter is pending before the court," the agency claimed.

A majority of Mittal's business activities in India are now defunct. However, he continues to be Non-Executive Director of Gontermann-Peipers (India) Limited. Speaking to the Firstpost on the condition of anonymity, a senior officer of the company said he has not seen Pramod Mittal during the board meetings and since Gontermann is not related to the case, he will not be in a position to make official comment.

"He might be attending the meeting and affairs of the company through video conferencing. I have no idea about his whereabouts," the official further said.

Also See: Nirav Modi fraud: Enforcement Directorate gets court permission to seek help from 6 countries

BoB fraud: ED arrests Subhiksha group MD R Subramanian for default of Rs 77 cr

Amit Shah hits back at Rahul Gandhi on PNB scam, says govt has taken 'most stringent of actions' against frauds

Read more on Business by Firstpost.