DRI to corner SBI, Bank of Baroda for hiding proof against entities in Rs 29,000 crore coal scam

The Directorate of Revenue Intelligence (DRI) has decided to get strict with SBI and Bank of Baroda for hiding evidence against corporate entities involved in the Rs 29,000 crore coal import scam and not cooperating in the investigation against them.

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Picture for representational purpose only.
Picture for representational purpose only.

The Directorate of Revenue Intelligence (DRI) has decided to get strict with State Bank of India (SBI) and Bank of Baroda (BoB) for hiding evidence against corporate entities involved in the Rs 29,000 crore coal import scam and not cooperating in the investigation against them.

If the situation arises, the DRI will take action against these banks by issuing a show-cause notice to them.

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The last communication of DRI with SBI and BoB took place in May 2017, when the agency requested them to share the money trail details of each corporate entity, as the "country has witnessed revenue losses in crores", but in reply, both banks responded negatively. Now, the DRI has decided to take these leading public sector banks head on.

On the condition of anonymity, senior DRI official told India Today, "So far, we have been soft with these banks. But within the next few months, if all these banks continue to remain adamant and deny sharing financial transaction details of all the 40 entities, the agency would not think twice before sending them notices and issue them a show-cause notice."

DRI has set a deadline of six months to complete the entire investigation and take this case to its logical end. "The agency has decided to explore MLAT (Mutual Legal Assistance Treaty) route to procure required evidence from Singapore, Hong Kong and Dubai", the official said.

Surprisingly, DRI officials have also hinted at the possibility of someone trying to stop the required evidence from reaching them.

"After issuing the letter rogatory (LRs) to a few countries, case details have started coming in. Even countries like Singapore are more than willing to share the evidence with us, but it looks like an "invisible outside hand" is stopping it from happening. The central government has been informed about it", the official told India Today without divulging more details regarding suspicious interferences.

On July 2016, India Today was first to expose these bottlenecks faced by DRI and the Department of Revenue (DoR) in a case which involves the biggest and respectable names of corporate India.

HOW BANKS WERE INVOLVED IN OVER-INVOICING IN SCAM

Almost two years ago, DRI Mumbai had unearthed a major coal import scam against 40 energy companies and coal traders, both public and private, who were involved in the alleged over-invoicing of imported Indonesian coal.

During the investigation, the agency established that the major banks involved in the money transfer and over-invoicing in this scam were State Bank of India, Bank of Baroda (BoB) and ICICI Bank's branches in Singapore.

"Almost 85 per cent of the fraudulent over-invoicing done by these companies took place through SBI's Singapore. Bank of Baroda's foreign branches handled around 10 per cent and ICICI Bank handled around 5 per cent", the official said.

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Despite having clinching evidence in hand, DRI's probe reached a dead end due to non-cooperation of banks, citing reasons of international legal agreement with concerned countries.

When DRI reported the hurdles to DoR on May 2016, Revenue Secretary Dr Hasmukh Adhia shot a confidential letter to SBI's chairman Arundhati Bhattacharya seeking "cooperation in the matter of great importance" and requested SBI to submit the documents to DRI at the earliest.

In his letter, Dr Adhia wrote, "During investigation, DRI had made a request to all such Indian banks for sharing the documents negotiated for the sale and purchase of Indonesian coal. The State Bank of India is yet to do the same citing legal constraints. To bring the investigation to a logical end, documents negotiated by SBI are required by the DRI. As a public sector bank, your Bank's cooperation is a matter of great importance".

But SBI was reluctant to share a single piece of information with the Indian government. In reply to Dr Adhia's letter, SBI chairman Arundhati Bhattacharya replied saying, "Section 47 of the Banking Secrecy Act does not allow the bank to disclose Singapore customer information directly to foreign government authorities unless specific permission has been granted by the customer himself. You may wish to seek permission from the customer to release the information".

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"In view of the decision conveyed by the Monetary Authority of Singapore (MAS) and in the absence of any mandate from the customer, SBI is unable to share the documents with DRI, Mumbai", Bhattacharya concluded.

WHAT IS COAL IMPORT SCAM?

It is a case of over-invoicing of imported coal prices starting from 2008 onwards. The DRI smelled a huge scam in coal imports from Indonesia, from where almost 80-90 per cent coal is imported to India.

In December 2014, the DRI had carried out a series of search-and-seizure raids across 80 locations in Delhi, Tamil Nadu, Gujarat, Karnataka, Andhra Pradesh, Maharashtra, West Bengal, Kerala and Odisha. The raids were carried out on coal importing companies, shippers, intermediaries and laboratories.

During the probe, it was noticed that even though the ships carrying coals directly from Indonesia to India, the bills were routed through fictitious and benami firms in Singapore, Hong Kong, Dubai and British Virgin Islands.

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The major allegation is that by using benami shell companies, the corporate entities inflated the prices of coal and sold it to the power projects (mostly belonging to its own subsidiary companies).

"The objective of over-valuation appears to be to siphon off money abroad and to avail higher power tariff compensation based on artificially-inflated cost of the imported coal", one of the investigators said.

Currently, 40 companies (public and private) are under DRI's radar for importing coals at inflated prices. It has been noticed that the value of coal was inflated to more than 250 per cent by these companies.

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