Malvinder, Shivinder Singh ultimate beneficiaries of Rs 2,315 crore funds division: Sebi

Stock market regulator Securities and Exchange Board of India (Sebi) in its order has stated that Malvinder and Shivinder Singh were the ultimate beneficiaries of the `2,315-crore funds diversion done in a fraudulent manner in Religare Enterprises (REL) and Religare Finvest (RFL).

The 24-page ex-parte order passed on Thursday by G Mahalingam, Wholetime Member, Sebi, says that this is a remedial measure, pending further investigation.

The regulator noted that the interim ex-parte order is to protect the interests of shareholders of REL as funds to the tune of `2,315.09 crore have moved out from RFL for the ultimate benefit of erstwhile promoters of REL. Malvinder and Shivinder Singh were the former promoters and entities controlled and owned by them have been found to have diverted the funds.

The Sebi order has directed REL and RFL to initiate steps to recall all the loans, amounting to `2,315.09 crore from the Singh brothers within three months.Malvinder and Shivinder Singh have been directed not to dispose of any of their assets or divert any funds, except for meeting expenses of day-to-day business operations, without the prior permission of Sebi. They have also been asked not to associate with the affairs of REL and RFL in any manner. Following the Sebi order, Religare Enterprises on Friday said that RFL has already initiated recovery proceedings against many of the entities mentioned in the order since June last year. These have been initiated through corporate insolvency resolution process under Insolvency and Bankruptcy Code. REL and RFL will also be filing a reply with Sebi. Since this is an ex-parte order, Sebi has said that the concerned parties can file their replies within three weeks.

The Sebi order marks another jolt for the Singh brothers, erstwhile promoters of of Ranbaxy and Fortis, apart from Religare. The Supreme Court on Thursday asked them to arrange funds to pay for the arbitration award to Daiichi Sankyo.

Listing violations of Sebi regulations and the listing agreement, the Sebi order said that though the funds have moved from RFL to RHC Holding and other promoter related entities, RHC Holding and ANR Securities, the ultimate beneficiaries of such fund diversion prima facie are Shivinder Mohan Singh and Malvinder Mohan Singh. “Thus, all these entities have prima facie acted in a fraudulent manner in the said diversion of funds”, the order said. The forensic audit commissioned by Sebi following complaints and RBI observations in REL, found diversion of funds through fixed deposits with Lakshmi Vilas Bank (LVB) of Rs 750 crore.

The audit found that against FD’s Rs 750 crore of RFL, LVB gave a loan of Rs 729.13 crore to Ranchem and RHC Holding, both entities owned by the Singh brothers. Thereafter, Ranchem transferred its entire loan amounting to Rs 188.29 crores to RHC Holding, which utilised Rs 706.80 crore, to pay off its debts to multiple entities.

There were other transactions were group entities were used to make payments to mutual funds or clear debts of the promoters. “It was observed that there were ongoing transactions wherein loans were given by RFL to entities, which were ultimately utilised by/benefitted the promoter entities of RFL/REL for varied purposes”, the audit noted.