Ranbaxy's Shivinder Singh, brother & three others held

Religare ex-promoters Shivinder Singh and his elder brother Malvinder Singh and and three others, including its former Chairman and Managing Director Sunil Godhwani, were arrested on Thursday in connection with a case of "siphoning off" funds to the tune of Rs 2,397 crore from Religare Finvest Ltd when the former along with his brother was controlling.

The arrests by Delhi Police's Economic Offences Wing came on an FIR filed on March 27 on a complaint filed by Religare Finvest Ltd (RFL), a REL subsidiary, against Shivinder and his estranged brother Malvinder along with others. The Singh brothers were promoters of Religare Enterprises Ltd (REL), Ranbaxy and Fortis Hospital chain before they lost control of the Group.

Along with Shivinder, police has also arrested former REL Chairman and Managing Director Sunil Ghodwani as well as Kavi Arora and Anil Saxena, who occupied important managerial positions in REL and RFL. Malvinder was arrested from Ludhiana while others were apprehended in Delhi.

According to the FIR, the Singh brothers, who had absolute control on REL, put its subsidiary RFL on “poor financial condition” by way of disbursing “high-value purported loans to shell companies...controlled or associated” them. The loans were given by RFL on the “sole and express basis that these entities were known” to the Singhs.

“The quantum of these loans today stands at an astronomical amount of Rs 2,397 crore as principal amount and Rs 415 crore as the interest amount. It is evident from the conduct of these companies that they never intended to repay these loans,” the RFL complaint, which is part of the FIR, filed on December 18, 2018, said.

The funds were never paid back and whenever payment was due, “either those loans were renewed” or “replaced by loans to some other group companies to repay the loan”, by way of round-tripping.

It is alleged that when the promoters “realised” that they are losing control of REL, they started making RFL extend loans but then “wilfully defaulted”. At least 19 entities linked to the Singhs and N K Ghosal, their long-time associate, have defaulted on repayment.

The brothers had the majority stake in the REL till June 2017 but were “effectively” in its control till February 2018 before they were out of the Board of Directors following the invocation of shares pledged by them with banks. They also exercised “deep and pervasive” control over the RFL.

After the exit of the Singhs, the Board of Directors of REL and its subsidiaries were reconstituted with professionals unconnected with the promoters. New professional management was also brought in.

The RFL said it has been cheated and its properties valued worth hundreds of crores have been "misappropriated, siphoned off and diverted through a labyrinth of financial transactions". It is a "well thought out and organised criminal conspiracy by which a financial scam of huge magnitude has been affected" by the accused, the complaint said.

Investigators said internal inquiries by the new management showed that the poor financial condition of RFL was on account of “wilful defaults on significant unsecured loans”. It also came to light that an RBI probe had raised concerns about the “promoters using their influence for disbursal of high-value unsecured loans” to entities related to the Singhs.

While the Singhs promised to take corrective actions, it is alleged, that RFL's exposure to such loans “kept ballooning”. The RFL complaint said as and when it received “instructions” from Singh or Godhwani, “sums to the tune of hundreds of crores were disbursed by RFL at short notice and at times without adequate documentation”.

The complaint went on to say that this documentation was “created only subsequently and antedated – thus forged”. At least 19 entities linked to the Singhs and N K Ghosal, their long-time associate, have defaulted.