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Cox and Kings Dossier – Part 2: ‘Conspiracy, fraud’ – Loan diverted to firm run by top executives, including auditor

Part of the loan given by Yes Bank to Cox and Kings subsidiary was allegedly diverted to a firm run by the company’s senior executives — including its internal auditor.

Written by Khushboo Narayan | Mumbai | Updated: April 25, 2020 4:57:15 pm
Cox and King Indian Express Exclusive story Cox & Kings CFO Anil Khandelwal (left) and Promoter Peter Kerkar. (File Photo)

THE slew of allegations against Cox and Kings, as reported in The Indian Express Friday, uncovered in its forensic audit, relate to falsifying records, attempt to siphon off funds, bogus sale and debt default. Add to this list: forgery, conflict of interest and criminal conspiracy.

Part of the loan given by Yes Bank to Cox and Kings subsidiary was allegedly diverted to a firm run by the company’s senior executives — including its internal auditor.

This firm, in turn, used that money to buy a stake in a Government-promoted financial institution, show records of a probe by Yes Bank and the resolution professional appointed by the National Company Law Tribunal.

Cox and Kings was one of Yes Bank’s top borrowers when co-founder Rana Kapoor was heading the bank. Yes Bank had an exposure of Rs 2267 crore to Cox and Kings.

Records of the probe, conducted after Kapoor’s exit from Yes Bank, show that a firm promoted by Cox and Kings, Ezeego One Travel and Tours Ltd, allegedly “siphoned” Rs 150 crore it borrowed from Yes Bank and invested it in Redkite Capital.

Cox and Kings was sent to bankruptcy court in October 2019, after it defaulted on payments.

This was done in two tranches between January 2018 and March 2019 through non-convertible debentures (NCDs).

Redkite Capital, set up in 2010, is owned by four firms controlled by Anil Khandelwal, Chief Financial Officer (CFO) of Cox and Kings; his father, Om Prakash Khandelwal; Naresh Jain, the internal auditor of Cox and Kings; and the Jain and Khandelwal family.

Redkite, records show, used the Rs 150 crore raised from Ezeego to acquire a controlling stake of 32.81 per cent in a government-promoted financial institution, Tourism Finance Corporation of India (TFCI), between February and March 2019 after the approval from the Reserve Bank of India (RBI).

The official spokesperson of RBI said the regulator does not comment on individual entities.

Probe records show that Ezeego did not disclose its first investment of Rs 80 crore in Redkite Capital in January 2018, in its audited balance sheets of that financial year.

Significantly, the second tranche of investment of Rs 70 crore was done by Ezeego on March 30, 2019, after it had defaulted on its loan payment obligation to Yes Bank.

Cox and Kings Dossier – Part 2: 'Conspiracy, fraud' - Loan diverted to firm run by top executives, including auditor Cox and Kings was one of Yes Bank’s top borrowers when co-founder Rana Kapoor was heading the bank.

The bank that has an exposure of Rs 945 crore to Ezeego reported the company account as fraud to the RBI in February 2020.

TFCI, a listed non-banking financial company (NBFC), was set up in 1988 by IFCI Ltd as an All India Financial Institution for funding tourism projects following the recommendations of the National Committee on Tourism set up with the backing of the Planning Commission.

Apart from Redkite Capital, the other shareholders of TFCI include IFCI (0.67%), LIC (3.73%), Oriental Insurance Co Ltd (1.07%), Tamaka Capital (Mauritius) Ltd (3%) and Koppara Sajeeve Thomas (5%). General public holds around 30.74 per cent of TFCI.

Significantly, TFCI is also one of the lenders of Cox and Kings.

The bankrupt travel firm owes about Rs 100 crore to TFCI, according to data obtained from the Registrar of Companies (RoC).

This loan was given to Cox and Kings before Redkite Capital became the majority shareholder of TFCI.

Records show that Redkite, immediately after acquiring the majority stake in TFCI, pledged shares of TFCI (as collateral) to raise Rs 85 crore from lenders.

Yes Bank has now alleged that Ezeego “indulged in criminal conspiracy” with Redkite and other connected entities with “an intention to cheat” the bank and “fraudulently” siphon off the money loaned to Ezeego.

Apart from this, Yes Bank has alleged that Ezeego One diverted about Rs 85 crore from a Rs 450-crore term loan given to it in June 2017 and submitted a forged end-use certificate with the bank.

Both Redkite Capital and Naresh Jain, in an email response, said they had not received any communication from Yes Bank and were not aware of any allegations made by the bank.

“We vehemently deny the allegations.We have maintained high governance standards in our transactions,” they said.

When contacted, a spokesperson from Yes Bank declined to comment.

Detailed emails to Ezeego and Ajay Ajit Peter Kerkar, the promoter of Cox and Kings, did not elicit any response.

Emails to Anil Khandelwal remained unanswered.

Cox and Kings 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.

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.

(Tomorrow: How audit reports, bank accounts were allegedly forged)

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