The Ministry of Corporate Affairs (MCA) has asked the Serious Fraud Investigation Office (SFIO) to investigate three firms promoted by Yash Birla — Birla Cotsyn India Ltd, Birla Shloka Edutech Ltd and Zenith Birla (India) Ltd, based on the recommendations of the registrar of companies (RoC).
The MCA order of January 7 directing an investigation into the three Birla firms is based on a September 2018 inspection report of the RoC that has alleged diversion of funds by these three firms.
“The inspectors (of SFIO) shall complete their investigation and submit the report to the central government within three months….,” said the MCA order issued under section 212 of the Companies Act 2013.
Apart from this, sources said the MCA is also planning to move the National Company Law Tribunal under the Companies Act to freeze the properties of Birla Cotsyn, Birla Shloka and Zenith Birla till investigation is complete.
“We have not done anything wrong. Let SFIO investigation happen. We have full faith in the judiciary and investigating agencies,” said Anant Vardhan, president, corporate affairs and communications at the Yash Birla Group.
Vardhan said while Birla Cotsyn and Birla Shloka have repaid all small investors, Zenith Birla is in the process of paying the investors. Earlier the government had ordered a SFIO probe on Birla Power Solutions Ltd, a Birla Group firm for alleged diversion of at least Rs 180 crore raised by the company from small depositors through various instruments such as fixed deposits. In all, 19,065 investors have invested in various companies of Birla groups — Birla Cotsyn, Birla Shloka Edutech, Birla Power Solutions and Zenith Birla.
According to the 2017-18 annual report of Birla Cotsyn, the company has a total debt of Rs 581 crore while Zenith Birla’s debt is around Rs 288 crore. As per the last available financials of Birla Shloka, the company had a debt over Rs 29 crore at the end of March 2015. Birla Cotsyn has defaulted on loan repayment to eleven lenders including State Bank of India, Axis Bank, Union Bank, Canara Bank, Indian Overseas Bank and Bank of India among others.
Yash Birla and his firms have come under the scanner of multiple investigating agencies including the Income Tax department, Enforcement Directorate and the Economic Offences Wing (EOW) of the Mumbai Police. The EOW has said Birla Power Solutions has defaulted on repayment of fixed deposits to its investors. In October 2016, the EOW in a chargesheet alleged that small depositors were attracted by the company’s name (Birla) to its various schemes and were promised a higher return.