Troubled Indian conglomerate, Videocon Group, laundered the equivalent of around US$7.3 billion it had obtained from a consortium of banks, India's Enforcement Directorate told a special Prevention of Money Laundering Act Court last week.

The funds were intended to secure offshore financings for the group's capital expenditure for its oil and gas businesses in Mozambique, Brazil and Indonesia, but these funds and others were allegedly diverted.

Misuse of a 14.25-year standby letter of credit (L/C) facility of US$2.8 billion in favour of Cayman Islands-registered Videocon Hydrocarbon Holdings (VHH) and sanctioned by a consortium of twelve Indian banks led by State Bank of India in 2012 is central to the prosecution's case.

Bank involvement

Bank officials as well as senior Videocon executives are amongst those in the firing line in this case. Prosecutors say the consortium failed to take a charge on the Mozambique assets and only belatedly took charges on the assets in Indonesia and Brazil.

The prosecution also claims that of the funds obtained through the standby L/C facility and several other credit facilities, Videocon diverted around US$196.75 million for purposes for which those funds were not intended.

Moreover, they maintain that some US$1.8 billion was routed to some of the group's overseas entities on the pretext of payment of refund of export advances and loans.

Background

The twelve participating banks in the VHH consortium are IDBI Bank (US$589 million), State Bank of India (US$500 million), Export-Import Bank of India (US$300 million), ICICI Bank (US$225 million), Central Bank of India (US$179 million), Union Bank of India (US$150 million), Bank of Baroda (US$53.5 million), Corporation Bank (US$50 million), Punjab National Bank (US$50 million), Syndicate Bank (US$50 million), State Bank of Hyderabad (US$40 million) and State Bank of Mysore (US$9 million).

Videocon was founded in 1979 by Venugopal Dhoot, who also faces charges of fraud in this case. The group once had 17 manufacturing sites in India as well as plants in China, Poland, Italy and Mexico, and became the world's third largest television and computer screen picture tube manufacturer.

Following losses in the oil and gas businesses into which it had diversified, the company stopped trading and entered into corporate insolvency proceedings in June 2018.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.