Deepak diamond factory financier says it was duped by mystery seacans

Four steel shipping containers that have been sitting near the Yellowknife airport for several years are the focus of a new multi-million dollar lawsuit against Deepak International.

Next month will mark three years since then-N.W.T. Industry Tourism and Investment Minister David Ramsay announced the sale of two abandoned diamond cutting and polishing factories to Deepak, saying it signalled "a rebirth" of the secondary diamond industry in the N.W.T.

It appears there has been no activity at the plants since that announcement.

Last week, Callidus Capital Corporation, the Bay Street financing company that loaned Deepak International the money to buy the factories, filed a $5.9 million lawsuit against the company, owner Deepak Kumar and his wife.

None of the allegations in the lawsuit has been proven in court.

In its lawsuit, Callidus says it provided Kumar with the financing on the understanding that the shipping containers held $18 million in automated diamond cutting and polishing machines that Deepak was going to use to run its operation.

Mystery containers

Callidus says when it was negotiating the terms of the financing, Kumar stated in writing that his father had provided the $18 million to purchase the diamond cutting machines from the manufacturer, Sahajanand Laser Technology Ltd. of Gujarat, India, and that the equipment was stored in the steel storage containers near the plants.

Callidus says Kumar claimed a personal net worth of $26.8 million.

The lender wanted to inspect the machines, but there was a snag. It says Kumar said the shipping containers could not be opened without a representative of Sahajanand Laser Technology present to supervise or the warranty for the equipment would be void. Kumar said an inspection would only be possible after the diamond factories were renovated, which would happen as soon as he got the financing.

"As a result…[Callidus] was only able to conduct limited due diligence in respect of the existence and value of the diamond equipment," Callidus says in court documents.

In June 2014, Callidus agreed to lend Deepak up to $15 million. It says Deepak has borrowed more than $3 million. Callidus says six months later it notified Kumar that he was failing to live up to certain obligations under the agreement — failing to pay municipal taxes on the diamond factories, allowing insurance policies to lapse and failing to provide financial information about his company.

Opening the containers

Callidus started getting nervous about what was in the shipping containers. In March, a Callidus official, James Hall, flew to Yellowknife to investigate. He learned that Deepak had not started renovating the factories, and asked Kumar to immediately open the containers.

Once again, according to Callidus, Kumar refused, saying that doing so would void the warranty for the equipment. Callidus hired Twilite Security to provide 24-hour security surveillance of four containers at the cost of approximately $1,000 a day, something it says was agreed to by Deepak's lawyer.

Kumar supposedly made arrangements for the inspection to take place in Yellowknife on Aug. 28, but Callidus says Kumar told them the Sahajanand Laser Technology representative's flight was cancelled at the last minute because of riots in India.

According to Callidus, Kumar then said further arrangements had been made to have the representative fly to Yellowknife on Sept. 25. Callidus said Kumar provided the representative's flight details and flight confirmation, but Callidus found that the ticket, which was booked Sept. 9, was subsequently cancelled.

Callidus says on Sept. 27, Kumar's lawyer emailed them promising to provide a "significant inventory of rough diamonds that Mr. Kumar held in a secure location" in exchange for more time to find another lender to repay Callidus.

The next day a Callidus official and a receiver it had appointed to handle collection of the debt finally opened the containers.

They found what Callidus describes as "a miscellaneous assortment of broken or obsolete hardware components and various other equipment in decrepit condition...In other words, the containers were full of junk."

The company later found out that the containers are owned by the territorial government. The equipment inside them was left behind by previous owners of the plants.

Mounting legal trouble

In its lawsuit, Callidus is asking the courts to order Deepak International, Deepak Kumar, and Ragini Kumar to pay it a total of $5.9 million and turn over the mortgages for the diamond plants. It's also asking for Deepak to be ordered to reveal the precise location of diamond cutting machines, any rough diamonds, and any other personal property owned by the Kumars.

In a separate lawsuit launched earlier this year, the company that arranged the financing is suing Deepak International for $615,000. It says Kumar simply ignored its written agreement to pay a fee for arranging the financing.

Closer to home, Ray Pirker Plumbing, which says it was hired to make sure the heating systems in the buildings kept operating, is also suing Deepak, saying the company hired it to maintain the heating systems in the two diamond factories, but has not paid up.

Deepak Kumar and his wife are believed to be living in Mississauga, Ont.

Kumar did not reply to phone messages left by CBC News. Callidus Capital Corporation also did not return phone calls.

The territorial government says it's continuing to work with Deepak International and "remains hopeful that the factories will open soon."