erbBob HE er,05 OSBI atau STATE BANK OF INDIA BY REGD-AD SHOW CAUSE NOTICE 7s Chincholi Sugar & Bio Industries Lid. | Mr. Thota Subbarayudu Sri Lakshmi Narasimha Nilaya, Plot No: 296, Road No. 25, H.No: 15, 5"" Main, 13" Cross, MSR Nagar, —_| Jubilee Hills, HYDERABAD, Mathikera, BANGALORE, ‘Telangana ~ 500 033. Karnataka-560054. e-mail: tsrayudu.t@gmail.com Eee | Me. Thota Madhu, Mr. Thota Subbarayudu, | Plot No: 93, HIG, Road No.3, H.No. 4. Palm County | Madhav Nagar Colony, BHEL Township, Shaikhpeta, Near Dargha, | Ramachandrapuram, HY DERABAD-502032. | HYDERABAD, Telangana, a Ms. Chandana Damisetty, Ms, Damisetty Chandana, | Plot No: 296, Road No. 25, M/s Chincholi Sugar & Bio Industries Ltd, Jubilee Hills, HYDERABAD, Sti Lakshmi Narasimha Nilaya, Pelangana — 500 033. No: 15, 5" Main, 13" Cross, MSR Nagar, | Mathikera, BANGALORE, Mr, Baburao Sangappa Patil, | Mr. Baburao Sangappa Patil. M/s Chincholi Sugar & Bio Industries Ltd, | R/O No.1/3/158, At Post: Chincholi, | Sri Lakshmi Narasimha Nilaya, Tal: Chincholi, Dist: Gulbarga, Main, 13" Cross, MSR Nagar, | Karmataka-585307. | Mathikera, BANGALORE, | Katnataka-560054. 7 cree . Thota Chandrakanth, Mr. Thota Chandrakanth, /o M/s Chincholi Sugar & Bio Industries L.td, | Plot No: 296, Road No. 25, vakshmi Narasimha Nilaya, Jubilee Hills, HYDERABAD, | HLNo: 15, 5! Main, 13" Cross, MSR Nagar, | Telangana ~ 500 033. er, Karnataka SAMB-I/MYD/IMK: 'y 03" April, 2021 Madam/Dear Sir, State Bank of India, Stressed Assets Management Branch had extended credit facilities to M/s Chincholi Sugar & Bio Industries Limited which were renewed! enhanced from time to time. As the company/firm and its Directors/Partners/ Proprictor did not adhere to the terms and conditions on which credit facilities were sanctioned and disbursed and also defaulted in repayment of the facilities as per the agreed terms, the loan account has becn classified as Non-Performing Asset (NPA) w.e.f 29.09.2013. ‘The Willful Defaulter Identification Committee of the Bank (hereinafter referred to as “Committee”) has examined the conduct of the account and utilization of credit facilities and has concluded that the acts /events of wii! ful default as detailed in the Anne; been committed by you @ bank.sbi Begs wige Rekjro we = ‘rere ants wie ren 11 ‘Stressed 491-40-2314 7100 EE Ro. F-A-1019/S, SoeB wos, URL DIOTIN, 14 Ha, —INO.3--1013/0, 150 +91-40-29807791 NOD SesSe50S a fs, avA.g.ah Acer. eLah Ta wert CAC. TSRTC Bus Station ronve, sow - 500037. adh, Beare ~ 500 027 Kachiguda, yéerabad - 5000027 © Sbi.18359@sbi.coin Website: wwrnsbico.in Website wawsbicoin Website ;wwnvsbicoin2. You are hereby called upon to show cause and make subt ns in writing within 15 days from the date of receipt of this letter as to why your name should not be included in the list of willful defaulters as per RBI guidelines. 3. Ifyou do not make any submission within 15 days as mentioned above, the Committee will pass necessary orders. . If you are declared as willful defaulter by the Committee the Bank reserves the right to publish your photograph in newspapers informing the public that the bank has declared you as willful defaulter as per RBI guidelines. 4. This communication is issued as per the orders and directions of the Committee. Yours faithfully,ustifica: for cower fault Criteria for classification as Wilful Defaulter as per RBI Master Circular No. RBU 2015-167 100 DBR. No. CID. BC. 22/ 20.16,003/ 2015-16 dated July 1, 2015. Relevant criteria of RBI Circular (Quoting the serial no. & criteria) Events of Willful Default [Evidences and documents ‘substantiating each event of Willful default 22.16 Transferring borrowed funds to the subsidiaries / Group companies or — other | corporate by whatever modalities, Forensic Audit was carried out by T RI (Chadha & Co LLP and Report submitted to Punjab National Bank (Lead Lender) and their observations are as under: l+ Payments made to six parties which are! inter-related to each other and directly or indirectly related to the Company - Rs.20.85 Crores from PNB Current A/c. | ls As per Bank Statement, we noted payment, of Rs.22.45 Crores to certain suppliers o' machinery. Forensic Auditors attempted to| verify the same with records. The material claimed to be supplied by the vendors were| not shown to Auditors for verification] during their initial visit to the Plant in| March 2019, '* Amount shown as received as promoter’s| contribution, utilised for making payments} to the related party (Rs.10.02 Crores from] OBC Current A/c) and another vendor| (Rs.6.94 Crores from PNB Current A/c). [Details as per Annexure-II ‘Forensic Audit Report dated| \July 2020 by by T R Chadha| ‘& Co LLP 3/213. The unit has ldefaulted in meeting its payment / repayment! lobligations to the lender| and has siphoned off the! funds so that the funds| have not been utilized| for the specifie purpose| for which finance was| availed of, nor are the {funds available with the| unit in the form of other, availed, instead siphoned off funds to related! |parties as discussed at point no. 2.2.1.c. assets. Siphoning 0 ‘Company has not commenced its operations|Forensic Audit Report dated ‘and did not utilized the credit facilities for the|July 2020 by by T R Chadha| specific purpose for which finance was|& Co LLPfunds, should be construed] to occur if any funds| borrowed from Banks/ Fls lare utilised for purposes| lun-related to the operations) lof the borrower, to the| detriment of the financial Ihealth of the entity or o| Ithe lender. The decision as} to whether a_ particular] instance amounts ~ to) siphoning of funds would) Ihave to be a judgement o' the lenders based on! objective facts. and circumstances of the case.As per Section 1(a): Payments made to six parties which are inter-related to each other and directly or indirectly related to the Company - Rs.20.85 Crores from PNB Current Ale. On verification of Bank Statements of the Company, we have noted that the company has made payments to Various parties which are directly or indirectly related to the Company and inter- related to each other. Based on review of these parties, their credentials and invoices submitted by them, we have observed that none of these parties have credentials for the work done by them/ supplies made by them against which payments made by the Company. ‘The Company has received Rs. 24.00 Crores Term Loan from PNB on 29th March 2010. On the same day Rs.18.05 Crores (out of Rs.20.85 Crores reported here) paid by the Company to various parties. + Six Companies to whom payments made have shown same address on their invoices ie, 13C, Bechu Chartterjee Street, Kolkata-700009 and No TIN No. & CST No is mentioned on the invoice. Even during our search in West Bengal Commercial Tax Department portal, we have not found the details of these parties. + Bills for the amount paid were submitted by the Parties to the Company in FY 2010-11 and FY 2011-12 but the corresponding incomelliability not found in the respective financial statements downloaded from MCA site. + Fixed Assets and inventory of the Companies shown as Nil. The material claimed to be supplied by the vendors were not shown to us for our verification during our initial visit to the Plant in March 2019, +The major assets of these companies relate to investment in shares of other companies and loans & advances given by them, No further details like name of the companies/ entities investment made and name of persons to whom advances given are available in this regard, +The major liabilities of these companies are share capital and securities premium. There are ‘no long term and short-term borrowings. + Payments have been made by the company to these parties through banking channel but the same was neither shown as income nor as liability by the recipient in their financial statements. + Subsequent to submission of draft report to the Lenders, the company has provided the comments on our observations which is given below. Further, company has arranged second plant visit on 28th June 2019 to show the equipment and material supplied by the parties. We have seen the equipment lying at Plant, However, since the identifying the physical material and equipment is being technical matter, we cannot comment on the same. + The documents such as GRN copies, LR copies, security registers, installation certificates ete. are not provided to us to verify the details of the items/materials received with physical material and also the identification of equipment as per records. + Further, we have noticed certain mismatches in records which are provided in page No-6 of forensic audit report.As per Section 1(b) Other Payments -Rs.22.45 Crores ‘As per Bank Statement, we noted payment of Rs.22.45 Crores to certain suppliers of machinery. ‘We have attempted to verify the same with records made available to us. Our findings are as under: ‘The material claimed to be supplied by the vendors were not shown to us for our verification during our initial visit to the Plant in March 2019. Further, company has arranged plant visit again on 28th June 2019 to show the equipment and material supplied by the parties. Our observations given below against respective parties. Name of the Party Amount Paid (Rs.in Cr) Mis Spring Vincon Private Limited 6.25 ‘Mis Priya Blue Industries Pvt Ltd 5.78 ‘Mis Shubh Arya Steel Pvt Limited 3.35 Mis D2R Bio Informatics Limited 7.07 Total 22.45 Further, M/s. Servel Krishna Engineers Pvt Ltd, Chartered Engineers have conducted valuation of Land, Buildings and Plant & Machinery of the Company in June 2015. While valuing the assets of the company, Valuers have not considered certain assets claimed by the Company as procured from below given parties. In their report it was mentioned that “based on the available documents, we have identified un-trusted invoices and value hiked invoices and we did not consider them for our valuation. Below given are the major invoices not considered for re- valuation”. Details given at page No.11 of forensic audit report. As per Section (2) Amount shown as received as promoter’s contribution, utilised for making payments to the related party (Rs.10.02 Crores from OBC Current A/e) and another vendor (Rs.6.94 Crores from PNB Current A/c). ‘The promoters have stated to have brought their contribution amounting to Rs.36.58 Crores. While tracing the same in Bank Statements of the Company, we noted that the company has made payment to some of the related parties and some of its vendors amounting to Rs.16.96 Crores which prima facie seem to be circular transactions. An amount of Rs.10.02 Crores is, paid to Turbo Machinery (related party) for which proper records and documents are not in place, Similarly, an amount of Rs.6.94 Crores is paid to another vendor D2R Bio Informatics for which again there are no record or evidences of work done as well as the same is not reflected in their financials. The pattern of the amount paid to these parties and receipt from the promoters also prima facie reflect that the same money is brought in by the promoters, given to related parties / vendors and then against the same is brought in and paid to them just to show the amount received as promoter’s contribution. However, the actual pavement of money by these related parties / vendors cannot be commented upon by us since we have not received any access to their books of account/ Party wise details of the same are given in table at page No.15 of the report. a, Turbo Machinery-Rs.10.02 Crores b. D2R Bio Informatics: Rs.6.94 CrSimilar observations noted for below 2 parties. + Company has paid Rs.0.50 Crores in FY 2012-13 to M/s Response Projects which has submitted invoice dated 4th Feb 2012 for Rs.0.57 Crores. However, as per the financials of the party (Response Project (India) Ltd) available in MCA for FY 2011-12 total tumover shown was Rs.0.02 Crores, + Company has paid Rs.2.91 Crores to M/s Brio Projects India Pvt Ltd. Total billing done by Brio Projects during the FY 2010-11 on the Company was Rs.2.95 Crores. However, Brio Projects in their financials for FY 2010-11 shown income of Rs.2.44 Crores. Further, we noted that the EPC Contractor Turbo Machinery Engineering Industries Limited is the related party to the company. In addition to the above mentioned Rs.10.02 Crores paid to the EPC Contractor the company has also paid an advance of Rs.20.43 Crores Turbo Machinery prior to the audit period. As per ABS of the Company for FY 2009-10 advances to Plant & Machinery includes advance of Rs.20.43 Crores paid to Turbo Machinery out of the promoter’s contribution. As per the ABS of the Company for FY 2012-13 the Company has shown Rs.12.55 Crotes as advance for Plant & Machinery given to Turbo Machinery under the head Capital Work in Progress (CWIP). However, break-up of such advances not shown in ABS of 2013-14. ‘Therefore, the company has paid them advance out of the contribution received from Promoters.