TaxTMI 
TaxTMI 
2019 (3) TMI 2040
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....n of funds in Religare Finvest Ltd (hereinafter 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, whi....
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....sactions in the bank accounts of the companies and the promoter/ promoter connected 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 (....
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....ller bank for creating fixed deposits of such a huge amount against which it had not taken any loan itself or had not given it 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 ....
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....L utilized the said Rs 200 Crores on December 14, 2016 to pay back the loan it had taken from SREI. Further, on the same day, i.e., December 14, 2016, SREI gave an equal amount i.e. Rs. 250 Crores to the REL's promoter entity i.e. RHC Holding routed through other entities. 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 mi....
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.... 109.30 Mr. Sandeep Shukla 8 Ad Advertising Pvt. Ltd. 100.00 Mr. Sanjay Gupta / Mr. Sanjeev Singhal 9 Artifice Properties Pvt. Ltd. 165.00 10 Best Health Management Pvt. Ltd. 40.00 11 Devera Developers Pvt. Ltd. 40.00 12 Fern Healthcare Pvt. Ltd. 150.00 13 Modland Wears Pvt. Ltd. 155.00 14 Rosestar Marketing Pvt. Ltd. 150.00 15 Star Artworks Pvt. Ltd. 150.00 16 Torus Buildcon Pvt. Ltd. 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....
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....(g) A loan amounting to Rs. 109.30 Crores had been given by RFL to Platinum on September 27, 2017. The said loan amount was subsequently transferred by Platinum to Prius Real Estate (hereinafter referred to as "Prius") which Prius utilized for repayment of an earlier loan of Rs.100 Crores taken by it from RFL on December 30, 2016. The said earlier loan taken by Prius on December 30, 2016 had been previously utilized by Prius to give a loan of Rs.100 Crores to Oscar Investments (hereinafter referred to as "Oscar" ) on the same date i.e. December 30, 2016. Oscar utilized the said loan from Prius to settle an earlier loan of Rs.100 Crores taken from RFL on December 27, 2016. It was noted that the earlier 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....
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.... utilised by/benefitted RHC Holding to pay off liabilities in the books of A-1 Book Company due for payment to multiple mutual funds on 23rd March 2016. Ultimate utilisation of the loans where contact person was Mr. Sanjay Gupta / Mr. Sanjeev Singhal and Mr. Sandeep Shukla (r) Pursuant to examination of all the loans mentioned at Table no. 4 , the audit report concluded that Rs. 1,260.96 Crores of loans given by RFL were ultimately utilised by/benefitted the promoter entities of RFL/REL for varied purposes the details of which are as follows:-. Table 5:Ultimate Utilisation/beneficiary of loans where Mr. Sanjay Gupta/ Mr. Sanjeev Singhal and Mr. Sandeep Shukla was contact person Sr. No. Borrower Name Principal o/s as on May 31, 2018 (Rs. In Crores) Ultimate Utilisation Amount (Rs. In Crores) Ultimate 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 Ar....
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....ligare Group Companies and Promoter Group Companies (u) Apart from the loans discussed under para 3 (C) (C) ( (i), loans were also given by RFL to other Religare group entities under its Corporate Loan Book, the details of which are as under:- Table 6: Details of loans given to Religare group Sl. No. Borrower Name Principal O/s as on 31 May 2018 (In Rs. Cr.) 1 Religare Comtrade Ltd. 125.00 2 Religare Enterprises Ltd. 185.50 Total 310.5 (v) The ultimate utilisation of the aforesaid as observed during the audit was as follows:- Table 7: Ultimate utilisation of loans given to Religare Group Sl. No. Borrower Name Principal O/s as on May 31, 2018 (Rs in Crores) Ultimate utilisation 1 Religare Comtrade Ltd. 125.00 Rs. 75 Crores had been transferred by RCL to REL and thereafter REL transferred money to RHC Holding through ANR Securities, which had been utilised to make payments to India Bulls Mutual Fund. Rs. 30 Crores had been transferred by RCL to REL and REL utilised that money to pay of loan taken by REL for capitalisation of RCML. Rs. 20 Crores had been transferred by RCL to R....
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....he aforesaid entities were jointly being controlled by Shri Shivinder Mohan Singh and Shri Malvinder Mohan Singh through Shivi Holdings Pvt. Ltd. and Malav Holdings Pvt. Ltd. respectively. The ownership details of Shri Shivinder Mohan Singh and Shri Malvinder Mohan Singh in RHC Holding, as on March 31, 2017, are depicted below: 7. The prime facie role of RFL and REL in the alleged diversion of funds to entities related to promoters of REL, viz. RHC Holding and ANR Securities, for the ultimate benefit of Shivi Holdings Private Limited, Malav Holdings Pvt. Ltd., Shri Shivinder Mohan Singh and Shri Malvinder Mohan Singh has already been established in the above paragraphs. Thus, all these entities have prima facie acted in a fraudulent manner in the said diversion of funds. From the above observations and findings, it prima facie appears that the abovementioned entities (Noticee nos. 1 to 9), by indulging in diversion of funds to the tune of Rs.2315.09 Crores (approx.) from RFL, a subsidiary of a listed company (i.e. REL), for the ultimate benefit of the promoters and their related entities, have violated the provisions of Section 12A(a), (b) & (c) of the SEBI Act, 1992 and Regulat....
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....f securities which are listed or proposed to be listed on a recognized stock exchange; (d) engage in any act, practice, course of business which operates or would operate as fraud or deceit upon any person in connection with any dealing in or issue of securities which are listed or proposed to be listed on a recognized stock exchange in contravention of the provisions of the Act or the rules and the regulations made there under. SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 4. Prohibition of manipulative, fraudulent and unfair trade practices (1) Without prejudice to the provisions of regulation 3, no person shall indulge in a fraudulent or an unfair trade practice in securities. (2) Dealing in securities shall be deemed to be a fraudulent or an unfair trade practice if it involves fraud and may include all or any of the following, namely:- (f) publishing or causing to publish or reporting or causing to report by a person dealing in securities any information which is not true or which he does not believe to be true prior to or in the course of dealing in securities; ....
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....vestigation of the fund diversion in this case is necessary to find out the role of each entity in the alleged routing of funds. However, pending detailed investigation, a remedial action is required to be taken by way of an interim ex-parte order to protect the interests of shareholders of REL as funds to the tune of Rs. 2315.09 Crores (approx.) have moved out from RFL for the ultimate benefit of erstwhile promoters of REL. 10. In view of the foregoing, in order to protect the interest of the investors and the integrity of the securities market, I, in exercise of the powers conferred upon me by virtue of section 19 read with sections 11(1), 11(4)(d) and 11B of the SEBI Act, 1992, hereby issue the following directions: i. REL and RFL (i.e. Noticee nos. 1 & 2) shall initiate steps to recall all the loans, amounting to Rs.2315.09 Crores (approx.) , as specified in table no. 8 under para 4 above, extended, either directly or directly, to the Noticee nos. 3 to 25 (viz. OSPL Infradeal Private Limited, Bharat Road Network Limited , Platinum Infrastructure Pvt. Ltd, Ad Advertising Pvt. Ltd, Artifice Properties Pvt. Ltd, Best Health Management Pvt. Ltd, Devera Developers Pvt. L....
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....14/12/2016) Ranchem Rs. 19.10 crore (14/12/2016) Rs. 175 crore (14/12/2016) Rs. 55 crore (14/12/2016) Rosestar Marketing RHC Rs. 19.10 crore (14/12/2016) Religare Corporate Services Document 3 RFL Rs. 109.30 Cr. (27/09/2017) PLATINUM Rs. 100 Cr. (27/12/2016) OSCAR Rs. 100 Cr. (30/12/2016) PRIUS Rs. 100 Cr. (27/12/2016) RAN CHEM Rs. 100 Cr. (27/12/2016) RHC Document 4 Prius used Rs.109.30 cr. on same day for repayment of loan taken from RFL on Dec 30, 2016 RFL Gave loan Rs.109.30 cr. of to Platinum on Sep 27, 2017 PRIUS PLATINUM Platinum transfers Rs. 109.30 cr. to Prius on same day Document 5 Oscar used Rs. 100 cr. on same day for repayment of loan taken from RFL on Dec 27, 2016 RFL Gave loan of Rs. 100 cr. to Prius on Dec 30, 2016 Oscar Prius Prius transfers Rs. 100 cr. to Oscar on same day Document 6 RFL transfers Rs. 100 Crores to Oscar Investments on 27th Dec. 2016 Oscar Investments transfers Rs. 100 Crores to Ranchem on 27th Dec. 2016 Ranchem transfers Rs. 100 Crores to RHC Holding on 27th Dec. 2016 ....