Dubai-based gold retailer Atlas Jewellery’s founder and chairman has been detained by the Dubai Police after a number of banks lodged a complaint of financial fraud against him, local media reported.
M.M. Ramachandran, who owns the chain of gold jewellery stores, reportedly borrowed around Dhs 550m from 15 banks in India and the UAE to fund his ventures. Lenders became concerned last week when Ramachandran did not respond to calls or messages, raising fears of a wilful default.
Following this, the banks presented his bounced security cheques to police, leading to his arrest this week, according to media reports.
Banks that had lent to Ramachandran have also formed a committee to recover the outstanding amount owed to them. But industry sources are not optimistic about the recovery of the funds.
According to a report in local daily Gulf News that quoted a senior banker, Ramachandran had borrowed nearly Dhs 30m from local banks last month while buying gold jewellery worth Dhs 20m from a dealer.
“With nearly Dhs 50m borrowed in less than a month, it is obvious that the money has not disappeared into thin air. He has obviously diverted the funds into some big investment either in real estate or some other investments. There must be a paper trail that will be revealed with thorough investigation and we need to act quickly,” the banker was quoted as saying.
Bankers are also trying to take control of Ramachandran’s healthcare business to recover the amount he owes to them, Reuters reported.
Atlas Jewellery was formed in Kuwait in the 1980s’ but later shifted base to Dubai where it grew steadily thanks to robust demand for gold jewellery.
However, the firm’s financial strength faded in recent years, media reports quoted industry sources as saying.
The UAE’s gold retail sector has become increasingly competitive over the last few years with new entrants in the local market.
Earlier this year, India-based Kalyan Jewellers said that it planned to invest up to Dhs 440m in the GCC and open 12 new outlets as part of a regional expansion.
Two new Indian gold retailers, GRT and Bhima, also opened their first outlets in Dubai this year, adding to the crowd of players in the local market.