Explaining the modus operandi, the CBI said Carnation took a loan of Rs 170 crore from PNB in 2009, which had turned non-performing assets in 2015. The bank had conducted a forensic audit through K G Somani & Company. According to the audit report, the accused borrower had not just sold the securities pledged with bank but dishonestly and fraudulently extended loans and advances to its sister concern/subsidiaries, too. Thereby it has committed misappropriation of funds and put them for personal use.
The bank, in its complaint in October, had mentioned the names of five accused, of which three were guarantors — Khattar Auto India, Carnation Realty and Carnation Insurance Broking. However, during verification no direct role of guarantors in committing the fraud with the bank came to light, and as such they are not named in the FIR. However, their role will be ascertained during investigation.
Refuting all the charges Khattar said, “The company has not indulged in any wrongdoing. A search was conducted by CBI but nothing incriminating was found.” He further said he had invested his life savings in the company. “I understand the bank is following a process. I have always made myself available and will continue to fully cooperate with all the agencies. The claims being made were examined in great detail during the forensic audit and we provided satisfactory replies on each. We were cleared in the forensic audit on each count. I have no doubt we will be vindicated again once the investigation is completed,” he said.
Khattar, a former IAS officer had joined then government-owned Maruti
Udyog in 1999. After the merger with Japanese auto major Suzuki, Khattar was retained. He played a significant role in beating tough competition with the foreign firms which were then exploring Indian markets and setting up base. After retirement at the age of 65, he started his multi-brand car sales and services network. Despite getting a private equity back, the business model failed to sustain. In 2017, the PNB dragged the company into insolvency proceedings.
“Carnation was a board managed company with the highest ethical standards and best management practices. Some of the most reputed investors in the country including Premji Invest and Gaja Capital
were board members who, in their own interest, kept a tight vigil on its operations and finances. Each financial decision was based on comprehensive business plans and approvals. The company was finally sold to Mahindra Group," Khattar said.
Post its failure as a business, an exhaustive and detailed independent forensic audit at the behest of the bankers under the resolution professional was conducted by a leading independent auditor and nothing was found amiss. Having found no lapses in operations or financial management, the PNB had complained in the matter to CBI as a part of the process followed by them.
In a separate development in the PNB Letter of Undertakings matter, the CBI has filed supplementary chargesheet naming Nirav Modi’s brother Nehal Modi and four others as accused. Sources said that additional charge sheet also mention the role of Cyril Amarchand Mangaldas which had allegedly received about Rs 2 crore from Nirav Modi last year in February.