Failed diamond polisher ordered by court to pay millions to lender
Deepak Kumar, who made deal with GNWT, conducted himself 'in questionable ways,' ruling states
Shane Magee
Northern News Services
Wednesday, December 7, 2016
SOMBA K'E/YELLOWKNIFE
A judge has ruled Deepak Kumar, his wife and his companies owe millions to a Bay Street firm after a failed attempt to restart diamond cutting and polishing factories in Yellowknife.
David Ramsay, left, then-minister of Industry, Tourism, and Investment, inks a deal with Deepak Kumar, president and CEO of Deepak International Ltd. giving Deepak International Ltd. approved NWT Diamond Manufacturer status. - photo courtesy of the GNWT |
Callidus Capital Corp. had filed a claim against Kumar, his wife Kushalini Kumar and his companies alleging they failed to live up to the terms of a loan and fraud based on a "false and misleading claim" it held diamond and polishing equipment worth $18 million.
NWT Supreme Court Justice Andrew Mahar ordered Callidus to receive $4,538,238.16 from Deepak International Ltd. and Deepak Development Ltd. in a decision issued Thursday. Kumar and his wife were each ordered to pay $1 million.
The companies were ordered to disclose and surrender property they own to a court-appointed receiver put in place to recover money for the lender.
The judge also ordered the factories at 106 and 108 Archibald St. to be sold off to recoup money owed to Callidus.
Douglas McNiven, who represented Deepak,
did not return a request for comment. Glen
Rutland, representing Callidus, declined to comment.
The ruling is yet another blow to Kumar's plan to reopen the shuttered factories. Department of Department of Industry, Tourism and Investment spokesperson Drew Williams said the government's ties to Deepak International through several agreements were severed in July.
"All of those agreements have now been terminated, so (his company) is no longer an approved Northwest Territories diamond manufacturer, they are no longer licensed to use polar bear diamonds or GNWT trademarks that they had," Williams said.
Kumar had secured financing from Callidus as part of a deal with the GNWT to restart the factories near the airport on Archibald Street, known as Diamond Row. He claimed to have $18 million worth of equipment stored in shipping containers near the facilities.
Two million dollars was provided to buy the buildings from the GNWT at a cost of $1.79 million and to install the equipment.
Callidus wasn't able to verify the contents of the containers.
Kumar, who told Callidus he was worth $26 million, defaulted on terms of the loan in December 2014 and fell behind on municipal taxes.
With issues mounting, Callidus had the containers opened in September 2015.
"They were full of junk completely unrelated to the business of polishing diamonds," the court ruling states.
Callidus filed its court action last fall seeking to recoup its money. In June, Rutland sought to have Mahar rule on the case without a trial. Deepak wasn't present for the hearing.
Mahar ultimately ruled in favour of Callidus. His 16-page written decision calls various arguments and allegations from Kumar and McNiven "ridiculous," "incredible," "disturbing, and were it not nonsensical, could well be seen as slanderous."
Mahar wrote Kumar had conducted himself "in questionable ways" but didn't go so far as to say he committed fraud, as Callidus claimed.
"While I do find that Mr. Kumar was less than entirely honest in his dealings with (Callidus), I simply do not have enough evidence to make a finding of fraudulent misrepresentation or false pretenses," Mahar wrote.
The ruling marks another step in the unraveling of a government dream to restart secondary diamond processing on Diamond Row. The previous company, Arslanian Cutting Works went into receivership in 2010 when it owed more than $42 million to creditors, including $5.8 million to the GNWT.
A deal announced in 2013 saw Kumar, a former ITI employee, purchase the factories and receive exclusive rights to engrave a polar bear logo on diamonds extracted in the territory.
The deal was heralded as "the rebirth of the secondary (diamond) industry)" by David Ramsay, then-minister of Industry, Tourism and Investment.
The plants never opened. Then came legal actions.
A year ago as the Callidus case unfolded, Ramsay defended the GNWT's actions, arguing Deepak's factories could have boosted a struggling economy if they were re-opened.
In June, McNiven said in court that Deepak was still optimistic he could replace Callidus as a lender with support for his plan from the GNWT.
Last month the GNWT announced it had stripped the polar bear trademark rights from Deepak. It has yet to say what will happen with the rights.
