TaxTMI 
TaxTMI 
2019 (3) TMI 2040
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....nafter referred to as "RFL"), a subsidiary of Religare Enterprises Limited (hereinafter referred to as "REL"), a listed company, for the benefit of promoters / group companies of REL. The complaints alleged inter alia the following: a) RFL had not complied with its Board approved investment policy with respect to fixed deposits ("FDs") and that FDs amounting to Rs. 750 Crores (approx.) placed with Lakshmi Vilas Bank (hereinafter referred to as "LVB") had been adjusted by LVB against loan availed by two group companies of REL's promoters. b) Investment by RFL in Non-Convertible Debentures ("NCDs") of OSPL Infradeal Private Limited (hereinafter referred to as "OSPL") amounting to Rs. 200 Crores was allegedly not consistent with the Board approved investment policy of RFL. As per the complaint, the said funds had been transferred by RFL to OSPL without any approval and the entire documentation was done thereafter i.e. approximately 3 months after the actual transfer of funds. The date of maturity of these debentures was June 14, 2017. However, the NCDs were not re-paid by OSPL even as on September 30, 2017. Since OSPL, which was incorporated on November 07, 2012, had a net wo....
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....ted entities needed to be examined in detail from FY 2008-09 to FY 2017-18. This required analysis of voluminous data in trailing of funds in the bank statements of the RFL, promoter/ promoter connected entities and any other entities that have significant financial transactions with these entities along with the analysis of nature of transactions and underlying documents. Hence, SEBI appointed MSA Probe Consulting Pvt. Ltd. ("MSA") as a Forensic Auditor on May 10, 2018 to examine the alleged diversion of funds from REL/ its subsidiaries for the benefit of promoter / promoter connected entities. 3. MSA submitted its final report in the matter of REL/RFL on December 12, 2018 (hereinafter referred to as "The audit report"). The major findings of MSA are as under: A. Diversion of Funds through fixed deposits with Lakshmi Vilas Bank (LVB) of Rs. 750 Crores:- (a) RFL had placed Rs. 750 Crores (approx.) as fixed deposits with LVB. Against these fixed deposits of Rs. 750 Crores, LVB had given loan of Rs. 729.13 Crores to Ranchem Private Limited ("Ranchem") and RHC Holding Private Limited ("RHC Holding") which were the promoter group entities of REL. Further these promoter group enti....
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....t as security, raises doubts about its true purpose. Loan given by LVB to RHC Holding and Ranchem Private Limited (g) LVB had granted multiple loans amounting to Rs.729.13 Crores to promoter related entities viz. RHC Holding and Ranchem against the above mentioned FDs placed by RFL between November 11, 2016 and January 09, 2017, i.e. during the period when the FDs were placed by RFL with LVB. The ultimate utilization of the said loans are as follows:- Table 1: Ultimate utilisation of loans given to RHC Holding and Ranchem Date Loan Given to Amount (Rs. in Crores) Ultimate beneficiary and Utilisation Beneficiary Utilisation 11th Nov 2016 RHC Holding 199.50 RHC Holding Used to pay off loan to multiple entities 11th Nov 2016 Ranchem 174.80 31st Dec 2016 RHC Holding 8.84 RHC Holding Multiple internal purposes of RHC Holding 31st Dec 2016 Ranchem 13.49 09th Jan 2017 RHC Holding 332.50 RHC Holding Pay off debt to India Bulls Housing Finance Total 729.13 (h) Thus, it is evident from the above that against FDs of Rs. 750 Crores of RFL, LVB gave a loan of Rs. 729.13 Crores to Ranchem and RHC Holding. Therea....
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....ties. Ultimate beneficiaries of the Loan of Rs. 250 Crores. (e) The amount of Rs. 250 Crores transferred by SREI to Torus Buildcon was immediately transferred further to the entities related to the promoters of RFL on the very same day i.e. December 14, 2016. (f) The movement of funds amounting to Rs. 250 Crores was observed to be as follows: (g) Thus the ultimate beneficiaries of the Loan of Rs. 250 Crores given by SREI to Torus were as follows:- Table 2: Ultimate beneficiaries of the Loan of Rs. 250 Crores given by SREI to Torus Ultimate Beneficiary and usage of funds Transferred through Amount (Rs. in Crores) RHC Holding - used to pay off loan of Indiabulls Liquid Fund, in the books of A1 Book Company 175.00 through ANR 55.00 through Ranchem 230.00 Religare Corporate Services A Promoter controlled entity Ranchem 19.10 RHC Holding- used for miscellaneous purposes Ranchem 0.90 Total 250.00 Overall Observation:- (h) On December 14, 2016, SREI and RHC Holding entered into an arrangement of back to back loans of Rs. 250 crores. According to the arrangement, first RFL extended loan of Rs. 200 Crores to OSPL, which was utilized by OSPL to pay....
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....5.00 17 Tripoli Investment & Trading Company 150.00 18 Vitoba Realtors Pvt. Ltd. 35.00 19 Volga Management and Consultancy Pvt. Ltd. 150.00 20 Zolton Properties Pvt. Ltd. 160.00 21 Religare Enterprises Ltd. 185.50 REL Group Company 22 Bharat Road Network Ltd. 50.00 Mr. Bajrang Choudhary Total 2,397.20 (c) As the number of entities were large in number, the findings related to the CLB have been grouped according to the name of the contact persons for each of the loans which are as follows:- i. Companies for which Mr. Narendra Goushal has been mentioned as contact persons ii. Companies for which Mr. Sanjay Gupta / Mr. Sanjeev Singhal and Mr. Sandeep Shukla have been mentioned as contact persons iii. REL Group Companies iv. BRNL for which Mr. Bajrang Choudhary has been mentioned as contact person (already been covered in para No. 3 (B). Companies for which Mr. Narendra Goushal was mentioned as contact person: The loans where Mr. Narendra Goushal was contact person are currently under detailed examination. Companies for which Mr. Sanjay Gupta / Mr. Sanjeev Singhal and Mr. Sandeep Shukla were mentioned as contact person (d)....
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....rlier loan taken by Oscar on December 27, 2016 from RFL had been ultimately utilised by the promoter entity viz., RHC Holding for debt repayment on December 27, 2016. Thus, it was noted that after the routing of funds in a circuitous manner through loans and repayments as mentioned above, the books of accounts of Platinum show an outstanding of Rs.109.30 Crores in favour of RFL. However, the said amount has actually gone out to the promoter entity viz. RHC Holding. A flow chart representing the said funds flow is depicted below for easy understanding: (h) The abovementioned movement of funds from RFL to RHC Holding, through various entities, is described in detail below:- (i) As seen in above diagram, Rs. 109.30 Crores transferred on September 27, 2017 by RFL to Platinum was transferred to Prius on the same day and the same was utilised by Prius for repayment of loan of Rs 100 crores taken in December 30, 2016 from RFL. The usage of funds of Rs. 100 Crores given to Prius by RFL on December 30, 2016, has been displayed below:- (j) Thus, Rs. 100 Crores transferred on December 30, 2016 by RFL to Prius was transferred to Oscar on the same day and the same was utilized by Oscar....
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....te beneficiary and Utilisation 1 Platinum Infrastructure Pvt. Ltd. 109.30 100.00 RHC Holding:- used for debt payment to multiple MFs on 27th Dec. 2016 (Balance is interest on roll-over of loan.) 2 Ad Advertising Pvt. Ltd. 100.00 100.00 RHC Holding:- used for debt payment to multiple MFs. on 25th Feb. 2016 3 Artifice Properties Pvt. Ltd. 165.00 74.48 RHC Holding :- used for debt payment to multiple MFs in the books of A1 Book Company on 06th Sept 2016 4 Best Health Management 40.00 115.00 RHC Holding:- used for debt payment to multiple MFs in the books of A1 Book Company on 23rd March 2016 Devera Developers 40.00 Vitoba Realtors 35.00 5 Fern Healthcare Pvt. Ltd. 150.00 125.00 RHC Holding:- used for debt payment to multiple MFs on 25th Feb. 2016 (Balance is interest on roll-over of loan and for interest payment on account of loan given RFL to Rosestar, Modland and Zolton) 6 Modland Wears Pvt. Ltd. 1 55.00 10.00 RHC Holding :- used, for debt payment to multiple MFs in the books of A1 Book Company on 07th Sept. 2016 7 Rosestar Marketing Pvt. Ltd. 150.00 150.00 RHC Holding:- used for debt payment to multiple MFs in the books of A1 Book Company on 1....
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....L utilised that money to pay of loan taken by REL for capitalisation of RCML. Rs. 20 Crores had been transferred by RCL to RELand the same had been utilised by REL for subscription of Right Issue of RHICL. 2 Religare Enterprises Ltd. 185.50 Rs. 12 Crores were used by REL for subscription of Religare Health Insurance Company Ltd amounting to Rs 13.52 Crores on 31st March 2017 and subsequently, the amount was rolled over. Rs. 13.50 Crores had been utilised by REL for subscribing to Religare Health Insurance Company Ltd. Right Issue on 31st August 2017. Rs. 160 Crores had been utilised by REL for payment of NCD Maturity amount of Rs 154.62 Crores to Standard Chartered Bank on 30 June 2017. The NCDs were taken for subscription of Preference Share in Religare Capital Market Ltd for Rs 545 Crores. (w) Thus, the audit report has noted that out of total loans mentioned at Table 6 above, an amount of Rs 75 Crores was ultimately utilized by RHC Holding for making payments to Mutual Funds. Overall Observations - Ultimate utilization of aforesaid funds 4. It was observed that funds amounting to Rs. 2315.09 Crores had been diverted from the books of RFL for the utilization of prom....
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....n 12A(a), (b) & (c) of the SEBI Act, 1992 and Regulations 3(b), (c) & (d), 4(1) and 4 (2) (f) & (r) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations, 2003). i. Further, the non-disclosure of funds routed by RFL, through unrelated entities for the benefit of promoters and promoters group entities, in the books of REL was to circumvent the provisions of Listing Agreement (including Clause 32 of Listing Agreement) and Regulation 53(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Further, misrepresentation of financial position by rolling over the loans as specified in point no. 4 (C) REL has also violated Regulations 4(1)(b), (c), 30(1), 51(1) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. 8. The abovementioned provisions of law provide as under: SEBI Act, 1992 12A. No person shall directly or indirectly- (a) use or employ, in connection with the issue, purchase or sale of any securities listed or proposed to be listed on a recognized stock exchange, any manipulative or deceptive device or contrivance in contravention of the provi....
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....ay induce sale or purchase of securities. SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 Principles governing disclosures and obligations. 4. (1) The listed entity which has listed securities shall make disclosures and abide by its obligations under these regulations, in accordance with the following principles: (b) The listed entity shall implement the prescribed accounting standards in letter and spirit in the preparation of financial statements taking into consideration the interest of all stakeholders and shall also ensure that the annual audit is conducted by an independent, competent and qualified auditor. (c) The listed entity shall refrain from misrepresentation and ensure that the information provided to recognised stock exchange(s) and investors is not misleading. Disclosure of events or information 30. (1) Every listed entity shall make disclosures of any events or information which, in the opinion of the board of directors of the listed company, is material. Disclosure of information having bearing on performance/operation of listed entity and/or price sensitive information 51. (1) The listed entity shall promptly inf....