[Turbanator]

CBI Books Ex-Maruti Suzuki MD Jagdish Khattar For Bank Loan Fraud Case




https://www.ndtv.com/business/former...=home-trending

[Aditya]

CBI Books Ex-Maruti Suzuki MD Jagdish Khattar For Bank Loan Fraud Case - Post moved to a new thread.

[V.Narayan]

Originally Posted by Turbanator

CBI Books Ex-Maruti Suzuki MD Jagdish Khattar For Bank Loan Fraud Case
https://www.ndtv.com/business/former...=home-trending

Sounds quite harsh. I have known Khattar for several years. He may be guilty of over confidence, or having borrowed too much but that is different from fraud and crime. I wonder if his private equity investors pushed him into growing too fast and that pushed him to take on debt to fund growth. That is typically what XL spreadsheet PE warriors make companies do in order to hope for a 3X return in 5 years. Fact is Carnation was not well run. But from what I know of the man criminal conduct does not sound like him.

[SmartCat]

Livemint article gives more details:
https://www.livemint.com/news/india/...176888563.html

The accused borrowers dishonestly and fraudulently sold the goods hypothecated to the bank without its permission and diverted the funds thereby causing criminal breach of trust and cheating, causing wrongful loss to the bank and corresponding gain to themselves.

The probe agency has also alleged that PNB’s forensic audit found that Khattar had fraudulently sold fixed assets amounting to Rs.66.92 crore for a mere Rs4.55 crore without the bank’s prior approval -- assets which had actually been furnished to the bank as collateral. Khattar, the agency has alleged, also did not deposit the proceeds of the sale to the bank.

[laser2707]

This is most unfortunate. Mr. Khattar was a highly respected Auto professional. Going by the anecdotal history of Maruti, he along with Mr. Bhargava built Maruti into the powerhouse it is today.

I guess his post-retirement venture did not take off. In the current scenario of zero tolerance for defaulters, he is an unintended victim. I agree with V.Narayan, the punishment seems harsh. Perhaps this is also a fallout of the slowdown in the auto sector. A lot of businesses that feed off the industry are badly affected.

[Samurai]

The probe agency has also alleged that PNB’s forensic audit found that Khattar had fraudulently sold fixed assets amounting to Rs.66.92 crore for a mere Rs4.55 crore without the bank’s prior approval -- assets which had actually been furnished to the bank as collateral. Khattar, the agency has alleged, also did not deposit the proceeds of the sale to the bank.

So are we concluding that he could not have done the above as accused by investigators? These allegations would be backed by legal documents, right?

[GTO]

If a businessman defaults on a loan - due to a failed business - that's NOT fraud. It's plain business. The lender acknowledges the risk in giving a business loan and charges interest accordingly. There, I don't see Khattar doing any wrong.

However, to sell assets that were hypothecated / collateral to the bank . That is outright fraud. It's like buying a new car with an HDFC loan, selling it and pocketing the entire money. I know that Khattar & company were in a serious cash crunch to even pay basic bills / salaries & heard rumours, but this is crazy. If true, he deserves to be punished.

Carnation has become such a pain for Khattar. He should have just retired peacefully. Because the CBI is involved, an arrest seems very likely.

[BANDHAV]

I was employed with Carnation from mid 2011 to early 2013 at their HO in Noida at a lower level managerial position.

This was just an eventuality waiting to be happened.

[srini1785]

Its one thing to run a MNC with sold tech and financials and another to run your own company with borrowed money from PE and banks. These are some serious allegations. What a fall from grace!.

Nirav and now Carnation, woes just continue for PNB.

[GrammarNazi]

An enviable reputation of having being part of building the foundation of what Maruti Suzuki is today, gone down the drain. Such a pity that experienced & seasoned businessmen fall into the debt trap.

Then again, to see that hypothicated assets were sold off for less than 1/10th of the hypothecation value means that there is something beyond a regular "business failure" at play here.

Anyway, the matter is under investigation, so IMHO it's better we limit our speculation until more material information comes out and the man leads with his defence of his side of the story.

[Turbanator]

The accused borrowers dishonestly and fraudulently sold the goods hypothecated to the bank without its permission and diverted the funds thereby causing criminal breach of trust and cheating, causing wrongful loss to the bank and corresponding gain to themselves.

If I am not mistaken, Carnation business model was built on the franchise so were those franchise given Tools/ Equipment from the parent company? If those tools were investments of the franchise owners, PNB cannot lay claim to that equipment or were those shown as a property of Carnation and hypothecated wrongly?

Or did Carnation actually owned/ rented and managed some of the workshops? 160 Crores look a big amount for tools in a few of the carnation workshops that they might have managed directly. I am sure rentals/ renovations or securities can cost a lot and all that goes quickly to Zero if not serviced.

[SmartCat]

Originally Posted by Turbanator

Or did Carnation actually owned/ rented and managed some of the workshops? 160 Crores look a big amount for tools in a few of the carnation workshops that they might have managed directly. I am sure rentals/ renovations or securities can cost a lot and all that goes quickly to Zero if not serviced.

I don't think these are just fixed assets. Since carnation was involved in pre-owned car sales too, it is quite likely that they took car inventory financing from PNB.

[BANDHAV]

Originally Posted by Turbanator

If I am not mistaken, Carnation business model was built on the franchise so were those franchise given Tools/ Equipment from the parent company? If those tools were investments of the franchise owners, PNB cannot lay claim to that equipment or were those shown as a property of Carnation and hypothecated wrongly?

Or did Carnation actually owned/ rented and managed some of the workshops? 160 Crores look a big amount for tools in a few of the carnation workshops that they might have managed directly. I am sure rentals/ renovations or securities can cost a lot and all that goes quickly to Zero if not serviced.

All the initial units were Company Owned and Operated. Entire staff in HO as well as state units were on payroll, "including Mr. Khattar's two sons".
People were poached from different automobile organisations at super fat pay packages. The initial set of employees were given company owned cars, which were obviously paid out of the borrowed capital.

HO was in a rather fancy piece of rented real estate. Opex were massive, Carnation was not breaking-even even after being in operation for almost 5 years.

It was only after the Gaza Capital round of funding and their intervention focus was shifted on becoming profitable from increasing topline.

[Turbanator]

Originally Posted by BANDHAV

All the initial units were Company Owned and Operated.

Understandable, but what all could they have sold as blamed?


Did they actually buy 67 Crore of Equipment? I don't think it can depreciate so much so quickly and even it had, what was the need to sell hypotheciated stuff?

[Sutripta]

Maybe firesale of (overvalued, hypothecated) stock to meet immediate running expenses.

NPA cases above a certain level are compulsorily reported to the CBI nowadays I think.

Regards
Sutripta