In the year 1997, a case was registered against a cement factory whose primary business interest was constructions and this
factory was located near Kurnool. Government of India has provided a concession in rate of indirect taxes to the manufacturers of cement whose capacity is less than 98,000 Tonnes per annum or 300 tonnes per day. If the installed capacity of the cement plant is less than 98,000 Tonnes per year they were liable to pay 43% less tax compared to a cement plant whose installed capacity is more than 98,000 Tonnes per annum. Intelligence was gathered that this particular factory was misusing the concession by understating their installed capacity and subsequently a raid was organized to investigate the matter.
The working plans, financial records, energy audit reports, bank correspondence and project reports running into tens of thousands of pages was thoroughly checked to bring out the facts. During the verification of one of the project reports and the bank correspondence file certain interesting facts. The company has submitted a feasibility report to the banker who is a private financial institution that they have the capacity to manufacture more than 300 tonnes per day, if they provide a financial assistance of Rs.100 crores (or US$33,000,000) for the expansion program and to corroborate their claims they have submitted the working plans with drawings from the cement plant equipment suppliers to this effect. The Vice-
President(Finance) of the private bank was confronted with this information and asked to comment on the issue. Amazingly he himself brought out some correspondence kept privately with him which shows that the capacity of the plant was already increased to 600 Tonnes per day and subsequently with a few modifications to the machinery, to be increased to 900 Tonnes per day. Statements were recorded from the Vice-President about the evaluation process of granting such huge amounts of loans. He said that they study all the financial ratios, debtors statements, market potential etc. and all these answers that he has provided prove that the way the loan was sanctioned is in total violation of the norms provided by the Reserve Bank of India.
The tailpiece of this story is that when the Vice-President was contacted for an interview on a subsequent date approximately a fortnight later, it was known that he has resigned from the post to join a company elsewhere and the inside news is that he got
kickbacks to the tune of US$3,300,000 or 10% in the whole deal.