NOT just suspicious transactions solely meant to siphon off funds or falsifying records of sales, Cox and Kings Group is also accused, via its foreign subsidiaries, of forging reports of global audit firms and fabricating statements of foreign banks.
These forged documents were allegedly used to avail of better credit facilities from lenders and to also allegedly manipulate the financial statements of the flagship firm of the group, Cox and Kings Ltd, show records of the resolution professional appointed by the National Company Law Tribunal and an internal probe conducted by Yes Bank Ltd after the exit of Rana Kapoor, co-founder of the bank.
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.
According to probe records, in 2018, Malvern Travel Ltd UK, a firm where Cox and Kings held 49 per cent stake, submitted “forged and fabricated” end-use certificate and a bank account statement of its statutory auditor BDO LLP and bank Royal Bank of Scotland (RBS) respectively with Yes Bank. This was done to obtain a loan of 47 million pounds (about Rs 440 crore) from Yes Bank.
In July 2019, Malvern Travel and its three subsidiaries, Superbreak Mini Holidays Ltd, Late Rooms Ltd and Malvern Travel Technology, filed for bankruptcy in the UK. Subsequently, consultancy firm KPMG was appointed as the administrator of these firms. After a fresh audit, KPMG on January 23, 2020, shared the original bank account statements of the firms with Yes Bank.
Based on these account statements, Yes Bank alleged diversion of loan funds by Malvern to other Cox & Kings Group entities “leading to a complete destruction of enterprise value of Malvern”.
“As a former auditor of Malvern Travel, we are bound by commercial confidentiality and so can’t comment on any allegations made about the former management,” said the official spokesperson of BDO.
An email to RBS in UK did not elicit any response.
Records show that Raffingers UK LLP, an audit firm, has filed a criminal complaint before the National Crime Agency in the UK against Prometheon Enterprise Ltd (UK), a subsidiary of Cox and Kings Group for forging the statement of accounts of Prometheon for financial year 2019.
Raffingers has said it has not signed any statement of accounts of Prometheon for FY 2109, as it was not able to complete its audit. Significantly, records of the resolution professional show that the forged statement of accounts of Prometheon was allegedly sent to the statutory auditors of Cox & Kings in India, for consolidation, from a “fictitious domain name and email id of Raffingers”.
In March, the resolution professional informed the Ministry of Corporate Affairs (MCA) that due to the alleged forgery by Prometheon, the consolidated accounts of Cox and Kings Ltd signed by its chief financial officer and company secretary are incorrect. The RP has also reported it as a fraud to the MCA. Yes Bank has an exposure of 157 million pounds (about Rs 1460 crore) to Prometheon, that has defaulted in its payment obligation since June 2019.
Cox and Kings was sent to bankruptcy and insolvency court in India in October 2019 after it defaulted on payments. The travel and tour company owes Rs 5,500 crore to banks and financial institutions. Banks that have an exposure to the firm include Axis Bank, State Bank of India, Indusind, Abu Dhabi Commercial Bank, Kotak Mahindra among others.
Detailed emails to Cox and Kings, Ajay Ajit Peter Kerkar, the former promoter of the company and Yes Bank remained unanswered. Yes Bank has also alleged that Cox and Kings Financial Services Ltd, allegedly submitted a “manipulated” debtor statement with the bank to avail of a higher working capital facility of Rs 400 crore and “siphoned” the loan.
The bank has also alleged that Cox & Kings has allegedly misused Rs 4387 crore , it got from the sale of its profitable education firm, Holidaybreak Education Ltd in January 2019. According to the records “between February 2019 to July 2019, Cox & Kings has shared five different versions about the utilization of the sale proceeds” with its lenders.
Last month, Ajay Ajit Peter Kerkar was summoned for questioning by the Enforcement Directorate (ED), in connection with the money laundering case against Rana 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.