Deepak International, owners lose $4.5 million lawsuit to financiers

The business behind a troubled attempt to revive Yellowknife's diamond cutting and polishing industry may have been dealt a fatal blow, as a judge ruled that Deepak International and its owners owe a Bay Street financing firm $4.5million.

• Deepak Kumar a no-show at Yellowknife court hearing
• Deepak diamond factory financier says it was duped by mystery seacans

On Thursday, the N.W.T. Supreme Court granted a summary judgement for Callidus Capital Corporation in its lawsuit against Deepak International, ownerDeepak Kumar, and his wife, Ragini Kumar meaning that Callidus won its lawsuit without having to go to trial.

Justice Andrew Mahar found that Deepak International owes Callidus $4.5 million. If the company can't cover that amount with the security Kumar put up to get the financing, it will draw on personal guarantees of $1 million each made by both Deepak and Ragini Kumar.

More than half of the $4.5 million owed by Deepak International is interest and other charges on its initial $2.1 million loan.

In the lawsuit, Callidus alleged that Kumar failedto live up to the terms of his loan agreement by not making property tax and lease payments on the two diamond plants, failing to properly insure themand failing to provide financial information on his business.

In his analysis ofDeepak'sdefence, JusticeMaharused phrases such as "ridiculous, "nonsensical," "incredible" and "madness."

Callidus not alone

Callidusis owed the most, but is by no means the only organization that's found trouble collecting from Deepak.

While the companycontrolled the buildings, property taxes went unpaid, lease payments were not made, and the company that helped Kumar get financing went to court to collect from Deepak. Even a Yellowknife plumber who Kumar hired to make sure the building's heating systems were maintained went to small claims court.

Ray Pirkersays Kumar gave him credit card numbers and cheques that were no good. He says just before his matter was to be heard in court, Kumar finally paid up.

"He asked me not to let anyone know that he owed me money, that he hadn't paid, and basically that he was a scoundrel," said Pirker. "Within the next three weeks or so I was paid."

In court documents, Callidus says since it took control of the plants through a receiver about a year ago, the lease and tax payments have been brought up to date.

Latest in series of blows

The judgement is the latest in a series of blows against Deepak International, which was once hailed as a savior of Yellowknife's diamond cutting and polishing industry.

Last month, the territorial government revoked its right to buy diamonds from Northern mines, as well as its ownership of the polar bear logo.

In 2013, then-N.W.T. minister of Industry, Tourism and Investment David Ramsey announced the sale of two abandoned diamond cutting and polishing factories to Deepak, saying that it signalled"a rebirth" of the territory's secondary diamond industry.

Since the announcement, it appears there has been no activity at the plants.

The current minister of Industry, Tourism and Investment, Wally Schumann, was unavailable for an interview about the fate of the polar bear logo and the future of the north's secondary diamond industry. It's an industry the government spent millions trying to foster. At least fivecompanies, including Tiffany and Co. subsidiary, LaureltonDiamonds, have tried an failed to make money cutting and polishing diamonds in Yellowknife.

In June, Kumar's lawyer, Douglas McNiven, said that a summary judgement against Kumar would be "game over" for the troubled company and its owner.

• Creditors winning lawsuit would be 'game over' for Deepak Int'l, lawyer says

"Game over for him to get financing, and game over for Callidus to collect its debt."

Some doubt about collecting

Callidus may havewon its lawsuit, but collecting on it may be more difficult.

The main security it accepted for its financing may not exist. In court documents it says Kumar showed it a receipt and warranty for $18 million in high-tech diamond cutting and polishing machines he says he bought from a company in India. According to Callidus, Kumar said the equipment was contained in sea cans outside the diamond plant.

Callidus advanced the $2.1 million to Deepakwithout ever having seen the equipment. When it started getting nervous about its decision it became insistent and finally opened the sea cans to find only old office furniture and other junk moved out of the empty factories.

Callidus says, in a last minute attempt to delay opening of the containers,Kumar offered to put up rough diamonds as security for more time to find another lender.

As part of the court decision, Kumar has been ordered to disclose the location of all of his assets. When attempting to get the financing for the diamond plants, Callidus says Kumar claimed a net worth of more than $26 million.