Mumbai: The Axis Bank Ltd has lodged a complaint alleging financial irregularities around 50 Crore in connection with credit facilities granted to companies linked to the Reliance Commercial Finance Limited (RCFL), part of the Anil Dhirubhai Ambani Group (ADAG). Based on the complaint, an FIR has been registered at Cuffe Parade Police Station against M/s Reliance Commercial Finance Limited, M/s Reliance Infrastructure Ltd, M/s Reliance Power Ltd, Devang Pravin Modi, Amit Vijay Singh Bafna, Amitabh Jhunjhunwala, other beneficiary ADAG Group companies, concerned company officials of ADAG Group companies, executive officers of the related ADAG Group companies, and the promoters of the ADAG Group and their representatives, along with 11 concerned bank officials, and the investigation has been taken over by the Economic Offences Wing (EOW).
Details of Loan Sanction
According to the complaint filed by Prakash Prabhakar Rao (48), Vice President at Axis Bank Ltd, the bank had sanctioned a cash credit facility of ₹50 crore to Reliance Capital Limited in July 2010. Subsequently, an additional ₹20 crore non-fund based working capital facility was also approved. Following the demerger of the commercial finance division in 2017, the facilities were transferred to Reliance Commercial Finance Limited. On January 28, 2020, Axis Bank declared the account as a Non-Performing Asset (NPA).
Resolution Plan and Audit
Later, the consortium of lenders approved a resolution plan submitted by Authum Investment & Infrastructure Ltd, under which RCFL is currently functioning as a wholly owned subsidiary of the company. During the process, the lead bank in the lending consortium, Bank of Baroda, appointed Grant Thornton India LLP in August 2019 to conduct a forensic audit of RCFL’s loan accounts. The audit reportedly revealed several serious financial irregularities.
Fund Diversion Allegations
The forensic report indicated that large portions of loan funds meant for business operations were allegedly diverted through structured transactions to Potentially Indirectly Linked Entities (PILE) and companies associated with the ADAG group. It found that approximately ₹1,867.89 crore was diverted to repay loans of group-linked entities.
Round-Tripping and Layering Found
The report further pointed to round-tripping and layering of transactions, wherein loan funds were routed through multiple intermediary entities to conceal the audit trail and the ultimate beneficiaries. About ₹1,199.29 crore was allegedly routed back to RCFL through such transactions.
Violation of Loan Covenants
Investigators also found violations of loan covenants, including the use of nearly ₹344.89 crore for investments in mutual funds and ₹200.38 crore for further lending, which were allegedly not permitted under the terms of the loan agreement.
Misrepresentation and Suppressed Facts
Additionally, the audit noted misrepresentation and suppression of material facts, stating that the financial statements and disclosures submitted to lending banks did not accurately reflect the company’s financial position or its financial relationships with ADAG group entities.
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Possible Loan Evergreening
The report also flagged possible evergreening of loans and accommodation entries, suggesting that certain accounting adjustments were made to project the loans as regular and portray a healthier financial position than actually existed.
Alleged Criminal Conspiracy
The complaint alleges that these acts were carried out as part of a criminal conspiracy by the then officials of RCFL, including Devang Pravin Modi (then CFO of RCFL), Amit Vijay Singh Bafna (then CEO of RCFL) and Amitabh Jhunjhunwala (then Vice President of Reliance Capital Ltd), along with other officials, promoters, and representatives of ADAG group companies.
Mumbai Police Jurisdiction
According to the complaint, the loan sanctioning process, documentation, disbursement, and fund transfers were carried out through the banking system in Mumbai, thereby giving jurisdiction to the city’s police. Based on the complaint, a case has been registered against Reliance Commercial Finance Limited (now known as Open Elite Developers Limited), Reliance Infrastructure Ltd and Reliance Power Ltd, along with the concerned former officials and other beneficiaries of ADAG group entities. Police officials said the Economic Offences Wing has taken over the further investigation into the case.
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