Delhi Police books Singh brothers & others on charges of cheating and criminal conspiracy

NEW DELHI: The Delhi Police have booked Malvinder Mohan Singh and Shivinder Mohan Singh, erstwhile promoters of Religare Enterprises Limited (REL), on charges of cheating, criminal conspiracy and breach of trust.

Acting on the complaint of a senior manager of Religare, the Economic Offences Wing of Delhi Police registered a FIR on Wednesday against the warring Singh brothers, REL’s former CMD Sunil Godhwani and a stock broker NK Ghoshal.

The complainant has alleged that the company and its subsidiary Religare Finvest Limited (RFL) have been cheated and its properties worth “hundreds of crores have been misappropriated, siphoned off and diverted through a labyrinth of financial transactions”.

The complaint, which forms the part of the FIR — accessed by ET— alleges that Singh brothers, in collusion with the co-accused, had “orchestrated the financial scam in or around 2016”.

It accuses the two brothers of hatching “a well thought out and organised criminal conspiracy by which a financial scam of huge magnitude has been effected (sic)”. The complainant has sought tracing and restitution of its properties. Singh brothers were promoters of REL till February 2018 and, as promoters, they “exercised deep and pervasive control over the management of RFL since it was a subsidiary company”.

The complaint (part of the FIR) further reads “REL is of the belief, also shared by RFL, that Singh brothers and Sunil Godhwani colluded and siphoned off funds from REL and its subsidiaries which include RFL and committed corporate fraud”.

REL and RFL have filed a separate complaints with the Ministry of Corporate Affairs for an investigation into the fraud.

The complainant added that Singh brothers lost complete control over REL and its subsidiaries, including RFL, pursuant to invocation of shares pledged by them and other promoter entities with various banks in February this year.

Pursuant to reconstitution, the board of directors consists of professionals, widely recognised in their respective fields, who are unconnected to the promoters.

“Upon taking over the reins, the new board and management realised that REL and its subsidiaries were in terrible financial condition and they sought to ascertain the reasons for such bad financial condition. Internal enquiries showed that the poor financial condition was to a large extent on account of wilful defaults on significant unsecured loans, defined for internal purposes as the Corporate Loan Book (CLB) by borrower entities either related, controlled or associated with the promoters, all of whom had been provided the subject loans from RFL on a non-arm’s length basis in violation of corporate governance norms and in contravention of policies and prudential behaviour expected of a NBFC registered with the RBI,” the complainant has submitted.

Later, RFL became aware of the SFIO and Sebi investigation of REL and its subsidiaries.

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

It adds “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.”

Elaborating, it said in a January 6, 2012, inspection report for the financial year 2010, RBI had observed that RFL had a practice of parking “a major chunk of surplus funds with the fellow subsidiary/group companies/other companies which were often being used for taking positions in securities”.