SynopsisThe bulk of these cases pertain to non-repayment of bank loans, other financial irregularities and money laundering (Yes Bank, Religare, Unitech), with a significant number involving securities law violations (Sahara, NSEL, IL&FS). Generally, corporate loan defaulters are booked under multiple sections of law; this gives the agencies elbow room to investigate the case properly.
A stint in jail isn’t something that anyone in the corporate world plans to put on their CV. But since 2011, over 30 Indian top-line promoters and C-suite executives have been arrested on charges ranging from cheating and forgery to bribery, defrauding large bank consortiums and even totting up financial irregularities that cut across continents.
The bulk of these cases pertain to non-repayment of bank loans, other financial irregularities and money laundering (Yes Bank, Religare, Unitech), with a significant number involving securities law violations (Sahara, NSEL, IL&FS). Generally, corporate loan defaulters are booked under multiple sections of law; this gives the agencies elbow room to investigate the case properly. Often, a predicate offence — an offence which is a component of a larger crime — could be a simple case of cheating; but, when charges of money laundering are added, securing bail becomes difficult. When a predicate offence involves money-laundering, it can come under the realm of a probe under the Prevention of Money Laundering Act (PMLA). For the Enforcement Directorate (ED), the federal agency empowered to probe cases under PMLA, a predicate offence by other law enforcement agency is a must. In high-profile cases, agencies go on filing supplementary chargesheets to keep the scope of the investigation open. “This makes it very difficult for an accused to get bail,” says a lawyer on condition of anonymity.
While stricter vigilance and surveillance by regulators and law enforcement agencies have helped cast light on corporate malpractices and boardroom shenanigans, this piling up of chargesheets means legal proceedings can take years. “We require mature systems where a corrupt official or a promoter is prosecuted, but the business gets protected,” says Zulfiqar Memon, managing partner at MZM Legal, which advises booked businesspersons like Rakesh Kumar Wadhawan and son Sarang of HDIL and Nirav Modi across multiple judicial platforms.
A corporate or financial fraud case should see expedited trials, the way it happened in the 2G scam resolution, say legal experts.
“In criminal matters related to alleged fund misappropriation, criminal breach of trust or money laundering, the authorities should take stern action; but to keep an accused in custody for two-three years will have a negative impact. These people are entitled to the presumption of innocence,” says senior advocate Amit Desai, who has represented Kapil and Dheeraj Wadhawan of DHFL, Kamal Kishore Gupta of Omkar Group, Vijay Mallya and Deepak Kochhar, among others.
For investigating agencies, unearthing a money trail and identifying assets bought using the proceeds of crime may sometimes take years. “It may take longer if the money laundering is done through shell companies across multiple jurisdictions,” says Karnal Singh retired IPS officer and former head of ED. “In cases that involve large sums of money, investigating officers have to comb through several financial records spread across many banks to identify which transaction is actually the proceeds of crime. At times, only a part of the transaction may be linked to the money laundering case at hand; so the investigating officer has to segregate the part that is siphoned off,” says Singh, who had helmed the Vijay Mallya, Nirav Modi and Mehul Choksi cases.
Sunday ET takes stock of a few prominent cases — of Sanjay Chandra, Malvinder and Shivinder Singh, Rana Kapoor, Kapil and Dheeraj Wadhawan, Rakesh and Sarang Wadhawan, Deepak Kochhar, and Ravi Parthasarathy — going through their chargesheets and court submissions.
SANJAY CHANDRA, FORMER MD OF UNITECH, HAS BEEN BEHIND BARS SINCE APRIL 2017. He and his brother Ajay Chandra were arrested by the Delhi Police’s Economic Offences Wing (EOW) on charges of failing to complete a housing project in Gurgaon’s Sector 70.
The charges against him (through multiple FIRs) include breach of trust, cheating and criminal conspiracy, filed by the Delhi Police; money laundering, filed by ED; and cheating and criminal conspiracy for duping Canara Bank to the tune of `198 crore, filed by CBI in December 2020.
A forensic audit report submitted before the Supreme Court in December 2019 claimed that Unitech had collected `14,270 crore from 29,800 homebuyers. Out of this, `13,364 crore was traced to bank statements. Almost 90% of the money was received between 2006 and 2014.
The ED has already attached assets worth over `537 crore. Lookout circular (LoC) was issued against Chandra and his wife Preeti, who is also under the ED scanner for allegedly parking proceeds of crime.
The Supreme Court in March 2021 had made adverse remarks against the Delhi High Court and a lower court for granting bail to Chandra and his brother. Describing it as “shocking exercise of judicial power, breach of judicial discipline”, SC stayed the bail. Earlier, in August 2020, SC had declined bail to Chandra and his brother on the ground that the duo had failed to comply with its October 2017 order according to which `750 crore was to be deposited with the Registry of the Court by December 31, 2017, to qualify for bail. While the Chandra brothers claimed that they had deposited more than `770 crore, the apex court observed that the deposit was made after the deadline. Moreover, a part of the amount deposited came from monetisation of assets of Unitech and from tax refunds, SC had observed.
Trial is pending. There has been no conviction in any case.
THE WADHAWAN BROTHERS, KAPIL AND DHEERAJ, ARE BEING PROBED IN A Rs 3,700 CRORE LOAN DEFAULT CASE OF YES BANK LTD (YBL). According to the CBI’s FIR, YBL invested Rs 3,700 crore in DHFL in the form of short-term debentures, which have not been redeemed by the latter. The private lender also sanctioned a Rs 750 crore loan to one of the companies of DHFL when Rana Kapoor was at the helm of Yes Bank. Around the same time, Kapil Wadhawan allegedly paid a kickback of Rs 600 crore to Kapoor and his family members in the garb of builder loans by DHFL to DOIT Urban Ventures (India) Private Limited (DUVPL). Roshini, Kapoor’s daughter, is one of the directors of DUVPL.
The CBI is also probing the brothers in alleged irregularities in investing the provident fund of the employees of Uttar Pradesh Power Corporation, amounting to over Rs 4,300 crore, in DHFL and other housing finance firms. Of the Rs 4,122.70 crore invested in DHFL, Rs 2,267.9 crore is still outstanding.
The brothers are also being investigated in a money laundering case registered by ED linked to fugitive gangster Dawood Ibrahim’s slain henchman Iqbal Memon alias Iqbal Mirchi. ED says the probe has revealed that the Wadhawans allegedly, through five shell companies, purchased three properties in Worli, Mumbai, from Iqbal Mirchi. The value of property as per book accounts was shown as Rs 111 crore but payment of over Rs 150 crore was allegedly made in Dubai through hawala channel. The loans were reportedly given to these shell companies by DHFL in a circuitous manner and part of this loan was allegedly used to make payments to Mirchi. The agency also claims that Rs 12,773 crore was allegedly siphoned off by the Wadhawans by citing it as loans to 1 lakh fictitious customers using 79 paper companies.
SFIO is probing issues related to corporate governance and is studying the forensic report prepared by consultancy Grant Thornton, which has concluded that DHFL floated hundreds of fictitious loan accounts, and used fictitious entities to demand recoveries of over Rs 14,000 crore.
The brothers have been arrested by ED, CBI and the Chennai Police. ED has provisionally attached properties worth Rs 1,411.9 crore in the Yes Bank case, and Rs 776 crore in the Mirchi case. On August 20, 2020, they were granted default bail by the Bombay HC in ED’s case after the agency failed to file its chargesheet within the stipulated period. The agency has contested the bail in SC. They are in judicial custody and lodged at Taloja Central jail. An email sent to DHFL lawyers remains unanswered at the time of going to press.
ACCORDING TO MULTIPLE PROBE AGENCIES SUCH AS ED, CBI AND SERIOUS FRAUD INVESTIGATION OFFICE (SFIO), ICICI BANK DISBURSED A LOAN OF Rs 300 CRORE (Rs 283.45 crore actual disbursed amount) to Videocon International Electronics Ltd (VIEL) on September 7, 2009, when Chanda Kochhar was at the helm of the bank. The very next day, Rs 64 crore was transferred out of the loan received by VIEL to Chanda’s husband Deepak Kochhar’s NuPower Renewables Pvt Ltd (NRL) through Supreme Energy Private Ltd (SEPL). ED terms `64 crore as proceeds of crime and is treating it as quid pro quo for the loan sanctioned by ICICI to VIEL. The agency claims that the money was used to purchase assets, including wind farm projects of 33.15 MW capacity. The ED probe found that an elaborate structure, through a web of companies, was created to hold the amount of Rs 64 crore.
The probe by the Mumbai regional office of MCA into the maze of companies floated by Kochhar and Videocon Group chairman Venugopal Dhoot concluded that Videocon Group “had no serious intention to recover the funds”.
On September 7, 2020, Deepak was arrested by ED. In January of that year, ED had provisionally attached assets worth Rs 78 crore, including a South Mumbai apartment of the Kochhars, attributing those to be proceeds of crime. Not finding merit in ED’s case, its adjudicating authority did not confirm the provisional attachments. In March this year, Bombay HC granted Deepak bail on a personal bond of Rs 3 lakh and one or two sureties of similar amount.
Message sent to Deepak remained unanswered till the time of going to press. His counsel refused to comment.
MALVINDER AND SHIVINDER MOHAN SINGH, ERSTWHILE PROMOTERS OF RELIGARE ENTERPRISES, WERE ARRESTED BY THE DELHI POLICE’S EOW IN OCTOBER 2019, and have been in jail since.
Allegations against them and their co-accused are that they misappropriated funds of Religare Finvest Limited (RFL) to the tune of over Rs 2,400 crore. Following the registration of the case by EOW, ED registered a case of money laundering and arrested the brothers towards the end of 2019.
While multiple chargesheets have been filed by EOW and ED, no charges have been framed by the court yet. Investigations are ongoing, and scrutiny of documents by defence is underway.
Observing that the allegations against Shivinder are “serious”, the Delhi HC in June this year cancelled the bail granted to him by a lower court in March. Remanding Shivinder back to Tihar jail, the HC held that the bail order of the lower court “suffered from serious infirmities resulting in miscarriage of justice”. Both the brothers are in Tihar jail.
Advocate Manu Sharma, who appears for Malvinder, told ET, “Men accused of so-called while-collar or economic crimes tend to get unfairly treated when it comes to consideration of bails. Ridiculous and unsubstantiated amounts of money are thrown around under the guise of ‘public money’, and that creates immense prejudice against these individuals. In the process, bails are denied and the accused end up spending long periods in jails.”
RANA KAPOOR, COFOUNDER OF YES BANK, IS BEING PROBED IN CONNECTION WITH AN ALLEGED LOAN FRAUD OF OVER Rs 25,000 CRORE. He was arrested in March 2020, and is currently in Taloja Central Jail in Navi Mumbai. Kapoor is being investigated by the CBI for “illegal gratification in lieu of favours extended in connection with official work”. The three FIRs registered by the federal agency are on loan of Rs 3,700 crore sanctioned to Dewan Housing Finance Corporation Ltd (DHFL), loan of over Rs 900 crore sanctioned to Ezeego One Travel & Tours Limited, sister company of Cox and Kings and Rs 466 crore loan granted to Oyster Buildwell Pvt Ltd, a holding company of Avantha Realty Limited.
Their probe also revealed that both Kapoor and the Wadhawans of DHFL allegedly flouted norms and didn’t pay heed to the recommendations made by their respective risk management committees to sanction loans, which the agency is treating as a case of quid pro quo. Based on the predicate offence registered by the CBI, the ED has registered a money laundering case against Kapoor and his family members.
On March 8, 2020, ED arrested Kapoor after 30 hours of questioning. LoC has been issued against him and his family members, including his wife and daughters. Properties worth Rs 1,250 crore, owned by Kapoor and his family members, including a bungalow on Amrita SherGil Marg in Delhi, a property in central London and another in New York, have been provisionally attached by the ED. Multiple chargesheets have been filed by CBI and ED. The CBI is awaiting prosecution sanction from YBL against Kapoor.
Kapoor’s counsel refused to comment on the story.
RAKESH KUMAR WADHAWAN AND SON SARANG WERE ARRESTED IN CONNECTION WITH A MULTI-CRORE SCAM AT PUNJAB & MAHARASHTRA COOPERATIVE (PMC) BANK. According to ED and Mumbai Police, between 2008 and 2014, HDIL and associate companies allegedly availed of mortgage against overdraft/mortgage loantype credit from PMC Bank, while Sarang and Rakesh availed of similar loan facilities in 2009-13. While awarding these mortgage facilities, PMC Bank showed 59,675 accounts with outstanding dues of Rs 5,528.38 crore. These allegedly included 21,049 fictitious accounts to conceal 22 loan accounts of HDIL with outstanding dues of Rs 4,638.46 crore and 22 other loan accounts with outstanding dues of Rs 3,815.82 crore.
The duo are also being probed in a case of evergreening of loans filed by a firm called Ocean Deity Investment, which owns 78.09% in an Indian JV with HDIL group. They are also being investigated for allegedly defrauding homebuyers and the Maharashtra Housing & Area Development Authority, the state authority to provide affordable housing, to the tune of Rs 1,034 crore.
The Wadhawans were arrested by ED and the Mumbai Police in October 2019. ED has attached assets worth Rs 293 crore belonging to the Wadhawans. They are currently in judicial custody and lodged in Mumbai’s Arthur Road jail.
Zulfiqar Memon, managing partner of law firm MZM Legal appearing for HDIL promoters, says, “As the matter is subjudice, I would not like to comment on the case. Having said that, I must state that only a fair criminal trial will determine if accused persons are guilty or innocent. Unfortunately, our system is designed in a way where irreversible damage is done to accused persons at the undertrial stage. ‘Bail is a rule, jail is the exception’ does not hold any importance anymore and public sentiments become a driving force in drawing conclusions.”
RAVI PARTHASARATHY, FORMER CHAIRMAN OF IL&FS, WAS ARRESTED IN A CHEATING CASE BY THE CHENNAI POLICE IN JUNE. Meanwhile, a larger case of alleged irregularities at IL&FS is being investigated by ED and SFIO. The scam is pegged at `1 lakh crore. According to a probe into IL&FS subsidiaries such as IFIN, they allegedly extended loans to borrowers despite negative net worth. The agencies claim that the top management was aware of the potentially problematic accounts and allegedly adopted fraudulent practices to not let such loan/credit facilities be classified as non-performing assets.
In spite of the precarious financial condition of the company, the lenders extended borrowing and gave donations — the Grant Thornton India report on ITNL enlists several such irregularities that led to the collapse of the road wing of IL&FS network, which exposed the mismanagement of the now beleaguered infrastructure development and finance company.
The SFIO says the auditors “connived, colluded with the coterie” to conceal material information and fraudulently falsified the books of accounts, and thereby the financial statements from FY13-14 to FY17-18. It said the auditors “knowingly did not report the true state of affairs of the company”, which resulted in losses for those who invested in its non-convertible debentures.
In January, ED attached assets worth Rs 452 crore of a Singapore-based shell company in connection with its money laundering probe. Parthasarathy is now in judicial custody in a Chennai jail. Former IL&FS vice-chairman Hari Sankaran and former IFIN CEO Ramesh Bawa are in Mumbai’s Arthur Road jail. Parthasarathy’s counsel was not available for comment.
Share the joy of reading! Gift this story to your friends & peers with a personalized message. Gift Now