CBI books firm for cheating Canara Bank subsidiary of ₹6.80 crore

The Central Bureau of Investigation (CBI) has booked a telecom firm from Baroda for allegedly duping a wholly owned subsidiary of Canara Bank to the tune of ₹6.80 crore.

In a complaint filed on October 4 with the probe agency, Canbank Factors Limited (CBFL) alleged that the firm, Accord Industries Limited, had availed Sale Bill Factoring amount of ₹8 crore from its Mumbai branch.

Factoring is a type of financial transaction in which a business entity sells its book debts to a financial institution at a discount, according to CBI sources. The collections from the customers are forwarded to the factoring financial institution by the business entity or the customers directly pay the institution. The maturity period of the bill is between 60 and 120 days. The factoring financial institution does not take on the risk of bad debts but can claim their money from the client even if the customers do not pay, the sources said.

As the account allegedly showed sickness since September 2014 and no payments were forthcoming from either the customers or the client to CBFL, the account was classified as a non-performing asset in June 2015, with an outstanding of ₹6.80 crore. Subsequently, the account was declared a “fraud” and reported to the Reserve Bank of India in August 2022, the sources said.

It was alleged that the accused firm had sold the entire shares of the company to another firm via a share-purchase agreement in May 2014. CBFL claimed that there was a merger and a change of management in respect of the accused firm in violation of the terms and conditions of the sanctioned limit.

CBFL accused the firm of cheating, suppression of facts, diversion of funds and criminal breach of trust. CBI registered a case against the firm and its directors, unknown public servants and others under sections 120B (criminal conspiracy) and 420 (cheating) of the Indian Penal Code and sections 13 (2) read with 13 (1) (d) (criminal misconduct by public servants) of the Prevention of Corruption Act.