The Central Bureau of Investigation (CBI) has registered a First Information Report (FIR) against the former Chairman and Managing Director (CMD) of the State Trading Corporation of India (STC), six former senior officials of the public sector enterprise, and KS Oils Limited in connection with an alleged ₹75-crore trade finance fraud. The case pertains to the sanction and execution of trade finance facilities for mustard oil purchases between 2010 and 2014. Investigators allege that multiple procedural irregularities and fraudulent practices caused financial losses to STC while providing wrongful gains to the accused entities.
According to the FIR, KS Oils Limited had approached STC seeking trade finance for the procurement of mustard oil. Under the arrangement, KS Oils was responsible for identifying suppliers, while STC extended trade finance by issuing usance Letters of Credit (LCs) in favour of those suppliers. A collateral management agency was appointed to oversee the receipt, storage, quality certification and monitoring of mustard oil stocks on behalf of STC.
The CBI has alleged that STC officials approved trade finance without conducting adequate due diligence and issued Letters of Credit beyond the sanctioned limits. Investigators also claim that shell and front companies were projected as suppliers of mustard oil and that funds released through the Letters of Credit were subsequently routed back to KS Oils. According to the agency, these transactions were carried out in violation of established procedures governing trade finance operations.
The FIR further alleges that false storage and quality certification was issued during the execution of the arrangement and that timely recovery measures were not initiated despite emerging irregularities. Investigators believe these lapses resulted in wrongful financial losses to STC. The agency has stated that the FIR was registered after a preliminary enquiry that continued for more than a year.
During the investigation, the CBI allegedly found that two supplier firms—Chambal Valley Agro Products Pvt. Ltd. and Gwalior Commodities Pvt. Ltd.—were shell entities controlled by KS Oils Chairman Ramesh Chand Garg and Director Davesh Agarwal. According to the FIR, directors and authorised signatories were appointed in these companies, while blank cheques and other documents were allegedly obtained to facilitate the diversion of funds. The agency claims these entities were used to obtain Letter of Credit proceeds, which were subsequently channelled back to KS Oils.
The investigation has also focused on the role of former STC officials in approving and monitoring the trade finance facility. According to the FIR, the then CMD headed the committee that approved the ₹75-crore trade finance proposal even though complete details regarding STC’s existing financial exposure to KS Oils were allegedly not placed before the committee. The CBI has further alleged that repeated extensions were granted for lifting or liquidating the stock instead of ensuring timely sale or recovery of dues, thereby increasing the financial risk to the public sector enterprise.
The FIR names seven former senior STC officials along with KS Oils, its Chairman Ramesh Chand Garg, Director Davesh Agarwal and other associated entities. At this stage, the allegations contained in the FIR are under investigation and have not been tested in court. The CBI said it is examining financial records, trade finance approvals, banking documents and corporate transactions to determine the extent of the alleged fraud and identify the role of each accused. Further legal action will depend on the evidence collected during the course of the investigation.
