A forensic audit of Cox & Kings Ltd, the listed travel firm that has come under the scanner of the Enforcement Directorate (ED) and the Economic Offence Wing of Mumbai Police (EOW), has found the company did not take board approvals for Rs 6,071 crore loans extended to at least 20 related parties between 2014 and 2019.
The audit conducted by PricewaterhouseCoopers (PWC) has found that the company recorded related party loans and advances of Rs 9,494 crore during the same period, of which about Rs 4,008 crore was loaned to 11 overseas entities connected to Cox & Kings. As per the audit report reviewed by The Indian Express, out of these offshore transactions, transfers of Rs 581 crore was allegedly done in violation of the Reserve Bank of India (RBI) norms.
Further, the PWC audit found that recoverables of at least Rs 589 crore from 11 disclosed related parties are based on a “generic” memorandum of understanding which cannot be “legally enforced” in case of a default.
The audit has alleged that inter-corporate deposits of Rs 2,565 crore transferred from Cox & Kings to a few connected entities were never “discussed in any of the board/finance committee meetings” of the listed travel firm.
The forensic audit also alleged a potential conflict of interest of the board and finance committee of Cox & Kings in approving transactions to related parties. It said some of the board members of Cox & Kings had “professional relationships” with related entities.
Cox & 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. Cox & Kings owes Rs 5,500 crore to banks and financial institutions, and it is one of the top borrowers of Yes Bank Ltd when co-founder Rana Kapoor was in charge. Yes Bank has an exposure of over Rs 2,267 crore to the Cox & Kings Group.
The travel firm came under the lens after the ED initiated a probe into allegations of kickbacks taken by Kapoor in lieu of granting loans to several firms that have now defaulted on repayments. Kapoor, who is currently under arrest, has denied these allegations.
The PWC forensic report has also red flagged transactions between Cox & Kings and its subsidiary Ezeego One Travel and Tours Ltd. Among other things, the report has raised questions over a transfer of Rs 796 crore from Cox & Kings to Ezeego One through a credit card of a public sector bank owned by an employee of Cox & Kings between April 2014 and March 2018. “The rationale of these payments are not known or explained,” said the audit report.
The audit report said that the insolvency resolution professional (IRP) of Cox & Kings, appointed by the National Company Law Tribunal (NCLT), has sent recovery notices to 57 debtors of the company that owe Rs 1,775 crore. Out of these, notices to 11 debtors including two connected to the promoters and employees of Cox & Kings that owe Rs 479 crore have been returned undelivered, while four debtors have denied any liabilities and four others have asked for more documents from the IRP.
Kerkar has denied wrongdoing and said he has registered 2 FIRs as complainant with the EOW and the ED has opened a case to find the real beneficiary of this fraud.
“Clearly I am confident that their investigation will reveal who the real beneficiary of the diversion of these funds as well as who has undeclared assets due the fraudulent use of funds,” said Kerkar.
In April, The Indian Express in a series of stories reported that a forensic audit found the travel did related party transactions worth Rs 21,000 crore over four years (2015-2019) to siphon off funds. It also found that Cox & Kings had falsified records, booked sales worth Rs 9,000 crore to over 160 customers who are bogus or do not exist and inflated bank balances.
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