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Public Outcry Over Huge Defaults Rakes Up Winsome Diamonds Case

Jatin Mehta

The public outcry over the alleged flight to the UK of Vijay Mallya, a sitting MP now declared a “wilful defaulter” by Indian authorities for refusing to settle debts of ₹6,800 crore ($1 billion), has once again raked up the issue of the Winsome Diamonds & Jewellery and an associated company, Forever Diamonds & Jewellery. These two firms together have also defaulted on roughly $1 billion. Winsome Diamonds has also been declared a wilful defaulter.

Winsome and Forever were promoted by Indian diamond dealer Jatin Mehta, who resigned from the boards of both firms and moved to Dubai in 2012. Mehta’s wife Sonia and son Vishal are listed as directors of Singapore-based Type IIa Technologies Pte. Ltd. which manufactures lab-grown diamonds. Vishal Mehta is the president of the International Grown Diamond Association, a global representative body of lab-grown diamond makers.

When asked by the Economic Times whether money from Indian banks was used to sponsor Type IIa Technologies, Jatin Mehta categorically denied this by email.

Defaults and non-performing assets of Indian banks were listed at a staggering ₹341,641 crore ($50 billion) as of September 2015, with the vast majority of the exposure that of the state-owned banks. Reserve Bank governor Raghuram Rajan has called for tough action and recovery of assets. Rajan’s call escalated the case against Mallya, who owned a liquor group that included Kingfisher beer, now majority owned by spirits behemoth Diageo, the now defunct Kingfisher Airlines (the cause of his default) and still owns the Force India F1 racing team.

The Central Bureau of Investigation (CBI), the Indian equivalent of the American FBI, is now involved in the matter and naturally, the spotlight has fallen on those next on the defaulter list after Mallya — Winsome Diamonds & Jewellery and Forever Diamonds & Jewellery. Banks are now threatening one remaining independent director of Winsome and several ex-directors with action including having them personally declared wilful defaulters if they do not aid in the recovery of the money.

Jatin Mehta has claimed that the firms defaulted because some UAE-based jewellers who were Winsome’s customers were hit by derivatives losses and were unable to pay Winsome. He has said that Winsome later moved the Sharjah Federal Court to recover the money. He has claimed that the Indian banks have not helped in this regard despite the Sharjah court’s decree in Winsome’s favour for a recovery of $1.2 billion plus 5 percent interest.

Indian banks, however, after several official visits to the UAE and the commissioning of a forensic report, are reportedly not convinced with this version of events. They suspect the authenticity of the UAE clients and have declared Winsome a wilful defaulter. The problem for the Indian banks, however, is that unlike the Mallya and Kingfisher case, the collaterals against the Winsome and Forever outstanding amounts don’t amount to much.

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