Using a web of offshore companies, funds were allegedly diverted from Religare Enterprises Ltd (REL), a company listed in India, into a Jersey firm that was solely owned by Malvinder Singh and Shivinder Singh. REL, which earned consolidated profits of Rs 92 crore on revenues of Rs 748 crore in 2007-08 turned into a loss-making firm in subsequent years with losses mounting to Rs 1,350 crore on revenues of Rs 2,586 crore in 2017-18.
The Singh brothers had a fallout with Sunil Godhwani, who was appointed by the brothers to lead their family office after Ranbaxy sale in addition to his role in Religare (of which he had become the CEO in 2001). Godhwani quit as Chairman and Managing Director of REL in July 2016, and stepped down as whole-time director in September 2017. Later on, the two brothers fought, blaming each other and Godhwani for fraud. Malvinder alleged that loans were given to Gurinder Singh Dhillon, the spiritual guru of Radha Soami Satsang Beas, to buy real estate.
Documents obtained from Appleby and Mauritius-based Conyers, Dill and Pearman — two big and reputed incorporators of offshore companies — show that Religare Capital Markets Ltd (RCML), a wholly-owned subsidiary of REL, set up an investment holding subsidiary in Mauritius in 2008.
Called Religare Capital Markets International (Mauritius) Ltd, this became a vehicle to acquire a 30 per cent stake in another Jersey-headquartered entity, NCM Limited.
The NCM’s shareholders, according to Appleby documents, are Malvinder Singh and Shivinder Singh, and their spouses Japna Malvinder Singh and Aditi Shivinder Singh. Between June 23, 2009, and August 26, 2015, the Indian company or RCML subscribed to ordinary shares and zero per cent optionally convertible debentures adding up to $367.64 million in share capital. The Singh brothers, however, denied holding any stake in NCM Ltd. “We would like to reiterate the promoters neither own or have or had any stake in NCM Ltd. Appleby’s have named the promoters, as this is the regulatory requirement in Jersey where NCM Limited was incorporated,” a spokesperson for the Singh brothers said. Annual accounts of Religare Capital Markets Ltd for 2015-16 show that as on March 31, 2016, the Mauritian subsidiary has equity of $404.17 million. During the year, it posted losses of $405.66 million.
Appleby undertook due diligence for Religare Mauritius when it wanted to roll over a standby letter of credit (SBLC) of $72.5 million in September 2015. An SBLC is a guarantee issued by a bank on behalf of a client and invoked if the client fails to honour a commitment to a third party. The company had originally entered into an SBLC facility agreement with Axis Bank in September 2014, with personal guarantees by the Singh brothers.
Internal correspondence of Appleby suggests that RHC Financial Services (Mauritius) Ltd had entered into a similar transaction earlier. It probably referred to $50 million borrowed from JP Morgan Chase in March 2011, with Conyers, Dill and Pearman, acting as a special legal counsel for the latter in this transaction.
RHC Financial Services, according to documents with Conyers, Dill and Pearman, was incorporated in November 2010 in Mauritius and is fully owned by RHC Holding Private Ltd. RHC Holding’s final beneficiaries again are the Singh brothers and their spouses, as per the Incumbency Certificate issued by Mauritius International Trust Company, and available with Conyers.
RHC Holding had signed an agreement with Religare Enterprises Limited (REL), a company listed in India, and its subsidiary Religare Capital Markets Limited (RCML) on February 13, 2012, as per which, “RHC entities infused preference share capital to the tune of Rs 1,333.47 crore in RCML in various tranches between 2011-12 and 2015-16.” At the time of this tripartite agreement, RHC Holding was the “ultimate holding company” of the REL.
On June 19 last year, however, RHC sent a legal notice to REL and RCML stating that it was “shocked to discover” that RCML has suffered huge losses worth Rs 731.84 crore on account of “provisioning/ write-off of amount equal to the value of investments made by RCML in Religare Capital Markets International (Mauritius) Limited.”
The blame game had begun. In June 2018, the Singh brothers held REL and its management (in other words Godhwani) responsible for the diversion of funds. A couple of months later, Shivinder blamed Malvinder and Godhwani for the problems. Then in February this year, Malvinder called out Shivinder, Godhwani and Dhillon, and blamed them for the mess in the group.
Malvinder Singh & Shivinder Singh response to The Indian Express
“We would like to reiterate that Promoters neither own nor have or had any stake in NCM Ltd. The information is therefore totally untrue and we deny it categorically. With reference to your below mail please note that by virtue of the four named persons (Promoters and family) as ultimate step-up controllers of Religare Enterprises Limited, Appleby’s have named the Promoters, as this is the regulatory requirement in Jersey where NCM Limited was incorporated. Would reiterate that promoters, were neither part of the Board nor the management of Religare during the said period. Regarding Appleby, it was the administrator for the entity. As is usual in offshore jurisdictions, a local company secretarial firm is appointed to ensure local compliances.
As stated earlier, in August 2013 Religare Capital Markets International (Mauritius) Ltd. (RCMIM) the Mauritius based subsidiary of RCM, acquired 30% stake in NCM. This was done after seeking all necessary regulatory approvals including from the RBI and SEBI. NCM Limited was incorporated in Jersey in March 2012. In March 2015, RCMIM divested all its stake in NCM. The promoters were neither part of the Board nor the management of Religare during that period.
As per The Money Laundering (Jersey) Order 2008, a PEP is an individual who is or has been entrusted with prominent public functions in a foreign country. Hence as per their local regulatory norm, the Promoters and their spouses were classified as PEPs because of their association with the company.
Trust this clarifies the position. We appreciate your patience and once again urge you not to file any such story on the Promoters or the company as this would be misconstrued and thereby be damaging to the reputation of the Promoters and the brand.”