Mallya Ef­fect? Win­some Pays a To­ken, Hopes to Keep CBI at Bay

Af­ter two years, banks led by Stan­dard Char­tered and Pun­jab Na­tional Bank re­cently re­ceived $150,000 from the jew­eller’s over­seas clients; co of­fi­cials deny that move is prompted by ac­tion against Mallya

The Economic Times - - Companies: Pursuit Of Profit - Su­gata.Ghosh @times­


Mum­bai: Amid the CBI and ED glare on Vi­jay Mallya, lenders to Win­some Group — In­dia’s sec­ond-largest wil­ful de­faulter af­ter Mallya’s King­fisher Air­lines — have re­ceived, for the first time in two years, a tiny frac­tion of the bil­lion-dol­lar out­stand­ing loan.

About $150,000 has come into the des­ig­nated ac­count from the Mid­dle East clients of the gold and diamond house Win­some and a group firm For­ever. While Win­some spokesper­sons and its pro­moter Jatin Me­hta — who has been away from the country for the past few years — claim that the group’s in­abil­ity to re­pay banks .₹ 6,800 crore was due to non-pay­ment by over­seas cus­tomers who lost heav­ily on gold and cur­rency de­riv­a­tive bets, banks in In­dia never bought the story.

The lo­cal lenders, sus­pect­ing a case of wil­ful de­fault, had com­plained to cen­tral in­ves­tiga­tive agen­cies when they sensed there was no easy way to re­cover the amount. The lo­cal banks had is­sued standby let­ters of credit (SBLC in bank­ing par­lance) — sim­i­lar to guar­an­tees — in favour of in­ter­na­tional bul­lion banks like Stan­dard Bank of South Africa, Stan­dard Char­tered Lon­don and Sco­tia­bank, which sup­plied gold to Win­some Group.

The ar­range­ment was if Win­some failed to pay the bul­lion banks, In­dian banks would step in to pay for the gold con­sign­ment. The agree­ments with banks were such that one de­fault could lead to re- call­ing the en­tire amount.

Af­ter Win­some de­faults in March 2013, In­dian banks had to pay the global bul­lion banks. Dur­ing the year, when the com­pany was ne­go­ti­at­ing with banks to re­struc­ture the loans, around $2.3 mil­lion was re­paid. The banks had not agreed to the pro­posed cor­po­rate debt re­struc­tur­ing. Even though the re­cent re­mit­tance of $150,000 takes place af­ter a gap of al­most two years, Win­some of­fi­cials de­nied that this was trig­gered by the re­cent ac­tions against Mallya.

“Af­ter fil­ing of the cases and ob- tain­ing the de­crees from the courts in Shar­jah, the de­fault­ing cus­tomers in the UAE have re­mit­ted an ad-hoc amount of $150,000 in the Pun­jab Na­tional Bank es­crow ac­count. The de­fault­ing cus­tomers have chal­lenged th­ese de­crees in the court of ap­peal in Shar­jah and the com­pany is re­sist­ing th­ese ap­peals,” said a Win­some of­fi­cial re­spond­ing to ET’s email queries.

But, a few ques­tions crop up: Why did a lit­tle known Mid­dle East jew­eller which has no di­rect deal­ings with In­dian banks and is out­side the ju­ris­dic­tion of In­dian in­ves­tiga­tive agen­cies and reg­u­la­tors, make a to­ken pay­ment? Also, if it has chal­lenged the de­crees in the Shar­jah court, why is it mak­ing a pay­ment (when it has lit­tle com­pul­sion to pay back)? When asked whether Win­some has re­quested In­dian banks not to pur­sue the cases (they have filed with cen­tral in­ves­tiga­tive agen­cies) in the light of the re­cent re­pay­ment, the spokesper­son said, “The com­pany has kept the In­dian banks ap­praised of all the de­vel­op­ments that have taken place in Shar­jah and has pro­vided them with the copy of the re­ports of the Ac­count­ing and Bank­ing ex­perts as well as the 26 de­crees passed by the Shar­jah Fed­eral Court in favour of Win­some and For­ever and not in light of the pay­ment of $150,000 from the de­fault­ing cus­tomers in the UAE as men­tioned by you.”


Some of the for­mer com­pany of­fi­cials, whom ET con­tacted, alle- ged that even though Jatin Me­hta had dis­tanced him­self from the com­pa­nies, they con­tin­ued to act on the in­struc­tions of Me­hta. Ac­cord­ing to them, Me­hta re­fused to ac­cept some of the con­di­tions that the bul­lion banks such as Stan­dard and Sco­tia had asked for in or­der to give the group more time to re­pay.

“There were sep­a­rate tele-con­fer­ences with th­ese two banks soon af­ter the de­faults. At that time, the de­fault was only .₹ 250 crore. They wanted us to ar­range the amount and give as­sur­ance that fur­ther de­faults would be avoided. They pulled the trig­ger af­ter no such prom­ises were made,” said one per­son con­di­tion of anonymity.

An­other of­fi­cial al­leged that a few months be­fore the de­faults, all in­for­ma­tion and data were re­moved from the com­pany’s sys­tems, fol­low­ing a buzz that there could be a tax raid. They said that while they have “shared th­ese in­for­ma­tion” in the course of their in­ter­ro­ga­tion by CBI and ED, they do not re­call whether th­ese were parts of their recorded state­ments.

But speak­ing to ET over tele­phone from Dubai and re­ply­ing to sub­se­quent emails, pro­moter Jatin Me­hta strongly de­nied th­ese al­le­ga­tions. “I had set­tled abroad since April 2011… I was asked to re­sign in a hastily called con­sor­tium meet­ing July 2012. There was an is­sue in­ter­na­tion­ally and the banks be­lieved that they could be bet­ter with­out me…Be­cause the com­pany has run into trou­ble due to the mis­deeds and neg­li­gence of th­ese ex­ec­u­tives and fool­hardy be­hav­iour of their cus­tomers, th­ese ex­ec­u­tives are now try­ing to dis­as­so­ci­ate them­selves from the de­ci­sions taken by them,” said Me­hta. It is not known whether Me­hta, who di­vides his time be­tween Dubai and An­twerp, would visit In­dia any­time soon. His has set up a firm to make lab-grown (or ar­ti­fi­cial di­a­monds) In Sin­ga­pore, but Me­hta claims he has no con­nec­tion with his son’s com­pany. Also, it is un­clear whether the in­signif­i­cant re­pay­ments would hold back CBI and ED from pur­su­ing the case.

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