Singh Brothers booked under IPC 420 for Rs 2397 crore fraud

New Delhi: Erstwhile promoters of Religare Enterprises Limited (REL), Malvinder Mohan Singh and Shivinder Mohan Singh have been booked by the Delhi Police along with former Religare Enterprises Chairman and Managing Director (CMD) Sunil Godhwani, and N K Ghosal, a stockbroker and associate of the brothers. The Economic Offences Wing (EOW) of Delhi filed a criminal case under relevant section of IPC including IPC 420 against the Singh brothers and others for allegedly causing Rs 2397 crore loss to Religare Finvest (RFL).

Religare Finvest is a subsidiary of Religare Enterprises Limited (REL), which was controlled by the Singh brothers until February 2018.

The matter came to light after the company conducted an independent forensic audit which was carried out by the new boards of Religare and Religare Finvest. In February, the boards were re-constituted with new directors after the exit of the two brothers in the wake of reports about them syphoning off around Rs 500 crore from Fortis Healthcare, which is also promoted by Singh brothers.

Medical Dialogues had earlier reported that Religare Enterprises Ltd (REL) said its subsidiary Religare Finvest (RFL) had lodged a criminal complaint with the Economic Offences Wing of the Delhi Police against promoters Malvinder Mohan Singh and Shivinder Mohan Singh. The complaint also named REL ex-CMD Sunil Godhwani, among other directors, for cheating, fraud and misappropriation of funds to the tune of Rs 740 crore.

Also Read: Religare files criminal complaint against promoters Singh brothers

They have been now been booked on charges of cheating, criminal conspiracy and breach of trust, based on a complaint filed by Religare Finvest (RFL).

"Case FIR 50 /19 u/s 409, 420,120B IPC was regd on complaint of Religare Finvest (RFL) that Malvinder M Singh, Shivinder M Singh & others having control on REL, put RFL in poor financial condition by disbursing loans to entities controlled by them causing loss of Rs 2,397 Cr to RFL," the Economic Offences Wing of Delhi Police tweeted.

Religare Finvest further alleged that the Singh brothers and others had cheated the company through misappropriation, siphoning and diversion of funds through a labyrinth of financial transactions. Calling it a "well thought out and organised criminal conspiracy by which a financial scam of huge magnitude has been effected" by the Malvinder, Shivinder and others, Religare Finvest said that they had also siphoned off funds from its parent REL.

According to Business Standard, the company said it had also conducted internal enquiries to ascertain as to why it was in a poor financial condition after the resignation of Singh brothers from the board.

"Internal inquiries showed that poor financial health of Religare Finvest was to a large extent on account of wilful default on significant unsecured loans, defined for internal purposes as corporate loan book by borrower entities either related, controlled or associated with the promoters," reads the FIR filed by Religare Finvest.

According to The Economic Times, the complainant has said that despite red flags raised by Reserve Bank of India (RBI), Singh brothers deliberately did not take corrective action and continued with the "financial scam."

The complaint quotes "from records it is apparent that RBI from time to time had expressed concerns regarding the CLB portfolio of RFL. But these concerns were not addressed by the promoters. RBI had specifically raised concerns about the promoters using their influence for disbursal of high-value unsecured loans to entities with no financial standing (but controlled or associated with the promoters) and breach of corporate governance norms."

"It appears that over a period of ten years, 115 entities were funded through the CLB book and the total amount funded was approximately Rs 47,968 crores", it adds.

"Hundreds of crores were disbursed at a very short notice and without adequate documentation. The quantum of those loans today stand at an astronomical amount of Rs 2,397 crore as principal amount and Rs 415 crore as the interest amount. A total of 19 entities have defaulted on their financial obligations towards RFL. It appears that ledger entries were done on earlier dates but repayments were received on the same day or in a time span of one to two days when the same or other companies were funded," the complaint states.

Besides RFL, REL had also filed a separate complaint against Singh brothers and Godhwani with the Ministry of Corporate Affairs under the Companies Act.