The Economic Offences Wing (EOW) of the Mumbai Police has written to the Maharashtra government to attach Birla House, a top heritage property of the city, and a few other properties after a probe by the agency revealed that Rs 300 crore raised from retail investors by Birla Power Solutions Ltd (BPSL), part of the Yash Birla Group, was allegedly diverted to other group companies.
The EOW recently wrote to the deputy collector of Mumbai City (Demolitions) to attach the Birla House, home to Yash Birla, officials have confirmed. Spread over 2 acres, Birla House was built by Yash Birla’s grandfather Rameshwar Das and was a regular stopover for Mahatma Gandhi during his visits to Mumbai. The Birlas own a collection of Gandhi’s letters and pictures.
Other than the Birla House, the EOW has listed nine other moveable and immoveable properties worth Rs 687.72 crore to be attached under the provisions of the Maharashtra Protection of Interest of Depositors (MPID) Act. The 5,412.27-square-metre Birla House on Pleasant Road, Malabar Hill, is worth Rs 425.50 crore.
According to the chargesheet filed by the EOW, depositors were attracted by the company’s name (Birla) to its various schemes and were promised a higher return with a rate of interest offered by the company, which is higher than that offered by banks (2.75 per cent more). Over a period of four years between March 2009 and 2013, the police said, BPSL diverted Rs 180 crore of investor funds to six other group companies through multiple transactions involving eight bank accounts.
”Birla had accepted amount as an institute director, whereas he is Agent even though in this complainant and witness/ investor had invest amount on trust, on which reason they have accepted thus working capital they are using for that purpose as they transfer this amount in the other sister Birla companies and committed civil crime by transfer the same amount,” reads the chargesheet, which was accessed by The Indian Express.
According to the chargesheet, a total of 8,894 investors had invested in the BPSL, but the principal amount and the interest were not repaid after the completion of the period. Also, financial institutes such as Birla Power and Birla Shlok (I) Ltd had accepted money from investors through various instruments such as fixed deposits, corporate deposits, bill of exchange. In all, 19,065 investors had invested in various companies of Birla groups — Birla Cotsin India ltd, Birla Shlok Educate India Ltd, Birla Power Solutions Ltd and Zenith Birla India Ltd.
The chargesheet filed in October charged the eight accused with cheating (420), criminal breach of trust (409) and criminal conspiracy (120 (B)) of the Indian Penal Code (IPC) along with certain sections of the MPID Act.
gBirla had attended over 80 board meetings of BPSL and the agency has also been able to prove that there are dubious transactions where depositors’ money has been routed in accounts to benefit the prime movers in the case,” Vikrant Singh Negi, counsel for the investors, told The Indian Express.
gThe scam is pegged at around Rs 400-500 crore. Yash Birla is a prime accused in the case and according to the findings of the Mumbai Police he was aware of the irregularities in the scheme offered by him but he never raised any red flag. Therefore, we wrote to the Deputy District Collector (Demolitions), Colaba, to attach Birla House and nine other properties under the MPID Act,” said a senior official.
Ideally, a property, which has been bought from the proceeds of the crime, is attached but there are provisions under the MPID Act where properties owned by the promoter, director, manager or the partner or the manager or member of the financial establishment which may be deemed fit by the government may be attached,” said the official.
Minutes of the meetings of BPSL, which were attended by senior functionaries including Yash Birla, PVR Murthy and other accused, have also been attached with the chargesheet. These meetings took place between July 2008 and February 2013 where issues related to BPSL were discussed.
gIn all the meetings Yash Birla was present and BPSL was listed on their items. In these meetings the decisions to borrow money by way of Inter Corporate Deposit, to give no objection to use the word ‘Birla’ for incorporation of a new company was taken. The draft newspaper advertisement for inviting and accepting deposits from public was approved. The decision to invest upto Rs 10 crore each in Birla Surya and Birla Energy infra Ltd was taken. The chairman informed the board that the company intends to acquire land for sale power project in Rajasthan was taken,” said the chargesheet.
The BPSL, however, defended its actions. “Police has no powers to attach the properties of any accused. Government of Maharashtra has already attached properties of various financial establishments vide Notification dated 19.3.2016 and there is no ascription of the attachment of any further properties till date. More particularly, when the Police / Home Department have failed to ascertain the quantum of investment falling under the provisions of MPID Act,” an email sent by defence counsel Ramakant Gaur read. “Some of the properties which have been attached are ancestral properties of mine which were bought between 1970-80 and are nowhere concerned with the alleged transaction of BPSL in any manner,” it added.
Gaur challenged the application of MPID Act in the case. “A large number of the investments in question, were in the nature of inter-corporate loans, which are also not deposits are contemplated by the scheme of the MPID Act. MPID Act is not applicable to loans rendered by the entities having money lending license as mandated by the Act,” he told The Indian Express.
On Birla’s role, Gaur said he was non-executive chairman, as recorded by the police in his statement under Section 161 CrPC, and the same was not controverted. “No evidence to the effect of Birla’s indulgence has been placed on record by the investigating agency and it is their hallucinated assumption or presumption. It is a matter of record that Birla has neither drawn even a single rupee as salary nor any other benefit from BPSL. So, there is no question of misappropriation of any money by him in his personal capacity,” he said.
Other than Birla House, the other properties include a plot and three bungalows at Juhu village (approximately 4,525 sq m and worth Rs 103.35 crore), a bank account held in Citi bank by accused P V R Murthy, and six demat accounts including the one held by Yashwardhan Birla.