Mumbai: Observing that a calculated financial fraud is serious and a threat to the economy, and the accused cannot be shown any leniency, a special court on Thursday convicted and sentenced to three years of imprisonment two directors of a garment firm for defrauding Bank of Baroda of more than Rs 4 crore in 2013.Special Judge Amit V Kharkar also fined the brothers, Rajesh Kanojia (40) and Prakash Kanojia (50), Rs 2 crore each. Their company, Asha Exim Apparels Pvt Ltd, too was found guilty of cheating and criminal conspiracy and fined Rs 1 lakh. The judge found the duo diverted credit facilities into fictitious accounts and sold off a property intended to be mortgaged as security for the debt.“It is pertinent to note that the accused, since the inception, harboured a design to defraud the bank, which is evident from the fact that they have sold the immovable property without mortgaging it with the bank… this is not the case of business falling in bad times. The accused… have in a calculated manner transferred the loan amount in their individual accounts and the accounts of the entities floated by them,” the judge said.Seeking leniency, the accused submitted that though the fraud is for Rs 4.16 crore, they deposited Rs 2.44 crore into the bank and the Debt Recovery Tribunal.Refuting this, the judge said, “…accused have not paid the amount out of their own volition. The amounts have been recovered by the bank by taking coercive steps. Accused cannot claim any bona fides.”Prakash’s wife, Asha Kanojia, had pleaded guilty in April 2023 and was sentenced to six months of rigorous imprisonment then. When an accused pleads guilty, they forfeit the right to a trial and are convicted.CBI’s special public prosecutor Jitendra Kumar Sharma cited the evidence from 29 witnesses and voluminous documentary evidence to secure the conviction.On Thursday the judge also acquitted nine others, including retired bank officials and businessmen, citing a lack of evidence about a shared criminal conspiracy.This case involves a criminal conspiracy to defraud the bank through fraudulent loan procurement and the subsequent siphoning of funds by the directors of Asha Exim Apparels Pvt Ltd. It was alleged that the primary accused, Asha and Rajesh Kanojia, secured credit facilities totaling over Rs 3.7 crore including two term loans for machinery and land, plus a working capital limit of Rs 2.5 crore. Despite these funds being earmarked for garment manufacturing, the investigation by the CBI’s economic offences wing revealed that the borrowers diverted the capital. Specifically, a plot of land in Navi Mumbai that was to be mortgaged to the bank was instead sold to a third party. Further, inspections revealed that the actual stock on-site was drastically lower than what was reported to justify the cash credit releases.It was alleged that the conspiracy was facilitated by several bank employees who failed to conduct proper pre-sanction due diligence. They allegedly suppressed critical information, such as the encroached status of the land and Rajesh Kanojia’s negative Cibil report. It was alleged that the branch manager submitted a false inspection report claiming to have verified the presence of 35 sewing machines that did not exist or were not purchased as claimed. It was further alleged that to conceal the diversion of funds, Prakash Kanojia, the guarantor, utilised fictitious firms and current accounts at HDFC Bank to circulate and “layer” the money. Funds were funneled through entities like Kesar Trade Links, which was not an actual machinery supplier, and Omkar Enterprises. This circular flow of transactions allowed the accused to siphon the bank’s money back into their personal accounts. As a result of these fraudulent activities, the account turned into a non-performing asset (NPA), causing a wrongful loss to Bank of Baroda.Acquitting the others, while the CBI contended that credit funds from the Bank of Baroda were routed into the accounts of the six accused, the judge held the mere presence of a money trail is insufficient to prove a criminal conspiracy. The judge also did not find proof that the three loan processing officers received any pecuniary advantage for their actions. Further, there was no evidence suggesting they abused their positions as public servants to grant undue favours to the main accused.The Kanojia brothers were in jail from Dec 29, 2017, to Jan 10, 2019. The time spent in prison before being granted bail will be set off against the sentence.
