Transactions worth Rs 21,000 crore over four years (2015-2019) done mainly to siphon off funds; falsifying records; a Rs 1,100-crore loan from a “brother to a brother” that violated basic fiduciary norms; sales worth Rs 9,000 crore to over 160 customers who are bogus or do not exist, inflated bank balances and a string of defaults — these are among a slew of alleged irregularities highlighted in the forensic audit of bankrupt travel firm Cox and Kings, The Indian Express has learnt.
Records of the audit, done in February 2020 by PricewaterhouseCoopers (PWC) at the behest of lender Yes Bank, and official records accessed by The Indian Express detail how the company allegedly fudged records and window-dressed its figures.
Cox and Kings, promoted and controlled by Ajay Ajit Peter Kerkar and his family, was sent to bankruptcy court in October 2019, after it defaulted on payments. While the promoter group owns 12.20 per cent shares in the company, the public owns the remaining 87.80 per cent.
The travel and tour company owes Rs 5,500 crore to banks and financial institutions and was one of the top borrowers of Yes Bank Ltd when co-founder Rana Kapoor was heading it.
Yes Bank has an exposure of more than Rs 2,267 crore to Cox & Kings Group. Last month, Ajay Ajit Peter Kerkar was summoned for questioning by the Enforcement Directorate (ED) in connection with the money laundering case against Kapoor.
Kapoor, currently lodged in jail, is accused of taking kickbacks in lieu of granting loans to several companies that have now defaulted on repayments.
The forensic audit has alleged that most of the related party transactions of Cox & Kings were executed without “proper approvals” from its board and without any loan agreement.
The investigation has found that Cox and Kings gave Rs 1,100 crore to Alok Industries, a stressed firm that went bankrupt in 2017, even as the travel firm did not have any business relationship with the company.
Significantly, when the loan was given, the Chief Financial Officer of Alok Industries was Sunil Khandelwal, who is also brother of Cox & Kings CFO Anil Khandelwal.
Apart from this, in financial year 2019 alone, Cox & Kings loaned Rs 589 crore to at least 11 related parties “without executing loan agreements”.
Cox and Kings Dossier, Part 2 | ‘Conspiracy, fraud’ – Loan diverted to firm run by top executives, including auditor
“Prima facie it appears that these loans have been granted to related parties without obtaining the requisite approvals/documentation, which raises a suspicion that these transactions have been done with the intent of siphoning off funds,” said the investigation report.
Detailed emails with questions to Ajay Ajit Peter Kerkar, Anil Khandelwal and Cox & Kings did not elicit any response.
In 2017, Alok Industries was sent to the bankruptcy court after it failed to repay Rs 29,500 crore to banks and financial institutions, including the State Bank of India. The company was acquired by JM Financial and Reliance Industries Ltd for Rs 5,050 crore in 2019 through the corporate insolvency resolution process.
The audit report on Cox & Kings has alleged that the company indulged in “falsification” of its financial statements between 2014 and 2019 by “overstating its sales figures and understating its debt”. It has also highlighted several “fictitious” transactions of the firms. Consider its key findings:
👉🏽Between 2014 and 2019, the company made sales of Rs 5,278 crore to 147 bogus customers. Of these, at least 141 are not registered with the Goods and Services Tax (GST) department. At least six customers have listed the GST registration number for Cox and Kings as their own registration number.
👉🏽Between 2016 and 2019, Cox & Kings made a substantial portion of its Rs 3,908 crore sales from 15 customers, who allegedly are non-existent. A physical verification of the addresses of these customers found that these were residential addresses and no travel agencies ever operated from these places.
👉🏽While the ledgers of Cox & Kings have recorded collections of Rs 2,548 crore from these 15 customers, the money was not traced in its bank accounts as no actual funds were received by Cox & Kings. Between April 2014 and June 2015, Cox & Kings recorded sales of Rs 250-Rs 260 crore against each of these 15 customers. All these transactions were “curiously” recorded only on the last day of the month.
👉🏽For FY 2019, the company disclosed cash and bank balances of Rs 723 crore and Rs 1,830 crore on standalone and consolidated levels respectively. Despite this, the company kept on defaulting on loan repayment since June 2019, indicating that it had inflated its cash and bank balances, which led to manipulation of its financial statements.
👉🏽For FY 2019, Cox & Kings reported the total debt of the company at Rs 2000 crore, whereas the standalone debt of the company was Rs 3600 crore. Apart from this, a credit card debt of Rs 750 crore was not disclosed to lenders, in violation of the disclosure norms.
In January, the National Company Law Tribunal (NCLT), that hears insolvency cases, restricted Ajay Ajit Peter Kerkar, Urshila Kerkar, Anil Khandelwal, three other directors of the company and 16 employees from leaving the country without the permission of the court.
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines