The team suspects these transactions were undervalued; however, they will be added to the list submitted to the National Company Law Tribunal (NCLT) only if substantial evidence of wrongdoing is found, the person said on condition of anonymity.
An administrator appointed by the Reserve Bank of India to turn around Srei Equipment Finance Ltd has found fraudulent transactions worth more than ₹3,000 crore over FY20 and FY21, Srei Infrastructure Finance said in a stock exchange statement on Monday.
“It is extremely difficult to back up a claim of undervalued transactions and thus difficult to prove. That said, the whole issue of alleged fraud or even undervalued transactions will have to be examined by the NCLT as only the adjudicating authority will decide the future course on this," the person cited above said.
Insolvency resolution processes typically involve transaction audits where auditors examine thousands of transactions by debtors to spot inconsistencies. In the case of Dewan Housing Finance Corp. Ltd (DHFL), the first non-bank financier to be referred to the insolvency tribunal by the regulator and acquired by Piramal Group last year, the administrator filed a case of fraud worth ₹12,705 crore in September 2020 and another one of ₹6,182 crore in February 2021, according to VCCircle.
Mint reported on Monday that financial creditors or lenders claimed dues of ₹10,727.5 crore from Srei Infrastructure Finance and ₹31,867.8 crore from its subsidiary Srei Equipment Finance.
“Even if these transactions at Srei are proved to be undervalued, the quantum wouldn’t be much. The largest chunk of it is already out in Monday’s stock exchange filing," the person said, adding the revelations show that the resolution process is being run in a transparent manner.
On Monday, the company said loans involved in these fraudulent transactions were ₹2,512 crore, while the notional loss to the company stood at ₹513.67 crore. The notional loss was due to charging lower interest rates while giving loans to 14 companies.
In October, RBI superseded the boards of Srei Infrastructure and Srei Equipment Finance, appointed former Bank of Baroda executive Rajneesh Sharma as their administrator, and referred the companies to NCLT.
Based on an initial audit report by BDO India LLP, Sharma has filed an application with the Kolkata bench of the NCLT on 10 June with regard to disbursements made to a clutch of entities. The application was filed against 14 respondents, including Power Trust, Kanoria Foundation and its trustees, India Power Corp. Ltd, India Power Corp. (Bodhgaya) Ltd, Tuticorin Electricity Supply Pvt. Ltd, Bhaskar Silicon Pvt. Ltd, Green Utility Pvt. Ltd, Environ Energy Corp. India Pvt. Ltd, Meenakshi Energy Ltd, Devi Trading and Holding Pvt. Ltd and certain other entities as reported by the transaction auditor. “It is to be noted that this is an initial filing based on the report submitted by the transaction auditor, and further filings may be undertaken in due course," the regulatory filing said on Monday.
An email sent to Sharma remained unanswered.
