"Large scale accumulation of fund from a very large number of persons has been found in two bank accounts of Chemannur International Jewellers which doesn't match with its sale of gold," says a report by the Securities and Exchange of Board of India (SEBI).
"Gold advances appear to be the major source of funds for the firm and the quantum of advance is in no way comparable with the sales figures and the inventories in stock," the report further adds.
The explosive report on SEBI’s probe into Chemannur International Jewellers was tabled by RBI officials at the 38th meeting of the State Level Co-Ordination Committee (SLCC) on regulation of Non-Banking Financial Companies (NBFCs) and deposit Acceptance Activities of Unincorporated Bodies (UIBs) held in Thiruvananthapuram on June 30.
Former Chief Minister VS Achuthanandan had on Wednesday lashed out attack at jeweller businessman and philanthropist Boby Chemmannur with allegations of financial irregularities in the disguise of deposit schemes. VS Achutanandan’s allegations were based on the same SEBI report.
The report, which TNM has accessed, was presented at the meeting chaired by the then Chief Secretary Nalini Netto and attended by Additional Director General of Police (Crimes) Nitin Agrawal, Additional Law Secretary P Sureshkumar and top officials of the RBI.
"The Chemmannur International Jewellers, an unincorporated entity owned by CD Boby (alias) Boby Chemmannur is found to be running a Deposit Scheme in the guise of Advance payment for gold purchase in violation of Section 45S of RBI Act 1934 (that is deposit taking by unincorporated body)," the reports says.
The report said that SEBI had found that the jewellery was running a deposit scheme in the guise of taking advance for gold purchase.
"This scheme offered by Chemmannur International Jewellers is spread across multiple states (Kerala, Tamil Nadu, Karnataka, Andhra Pradesh, Telungana and Maharashtra and reported scale of the operation may near Rs: 1000 crore," it says.
"During the period 2012-13 to 2014-15 Chemannur International Jewellers had collected about Rs.998.4 crores from the public under the head 'advances towards gold purchase'. As per the annual report of the firm, obtained from the promoter to SEBI, the total gold sales of the firm during the corresponding period was merely Rs 66. 3 crores. The inventory is also negligible vis-a-vis the amount raised," the report finds.
Accordng to SEBI, analysis of the information/ documents indicated that the jeweller did the following things:
1) Issue a certificate akin to deposit certificate against the advance for gold
2) Cancel the gold advance certificate upon receipt of cancellation or refund request
3) Regular interest payment in the name profit share mostly in cash
4) Guaranteed returns and no actual sale of gold in most cases.
Part of the money was invested in sister companies or firms including NBFC-Chemmannur Credit and Investment Limited. There are also allegations of deemed public issues by companies belonging to the Chemmannur group, which is separately being examined by SEBI.
The meeting had assigned RBI and the police to initiate further action.
ADGP (Crimes) advised RBI to examine the matter and officially forward the case to Police Department for necessary action. ADGP Crimes, the post at present is DGP (Crimes) was not available for comment.