Mumbai : The legal team working on the insolvency resolution of Kolkata-based Srei Group is probing more suspicious transactions beyond the ones disclosed on Monday, a person familiar with the matter said.
The team suspects that these transactions were undervalued; However, they will be added to the list submitted to the National Company Law Tribunal (NCLT) only if sufficient evidence of wrongdoing is found, the person said on condition of anonymity.
An administrator appointed by the Reserve Bank of India to operationalize Srei Equipment Finance Ltd. has detected fraudulent transactions of more than Rs. 3,000 crore in FY 2010 and FY 2011, Srei Infrastructure Finance said in a stock exchange statement on Monday.
“It is extremely difficult to back up the claim of low value transaction and thus difficult to prove. That said, the entire case of alleged fraud or even low value transaction needs to be investigated by the NCLT. Because only the adjudicating authority will decide the future course on this.”
Insolvency resolution processes typically involve transaction audits where auditors examine thousands of transactions by debtors to find discrepancies. In the case of Dewan Housing Finance Corporation Ltd (DHFL), the first non-bank financier referred to the insolvency tribunal by the regulator and acquired by Piramal Group last year, the administrator filed a case of fraud. 12,705 crore in September 2020 and another 6,182 crore in February 2021, according to VCCircle.
Mint reported on Monday that financial creditors or lenders have claimed dues 10,727.5 crore from Srei Infrastructure Finance and 31,867.8 crore from its subsidiary Srei Equipment Finance.
“Even if these transactions at Srei prove to be undervalued, the volume will not be much. The bulk of it has already been out in Monday’s stock exchange filing,” the person said, adding that the disclosures show that the resolution process is going on in a transparent manner.
On Monday, the company said the loans involved in these fraudulent transactions were 2,512 crore, while the estimated loss to the company was 513.67 crores. There was notional loss due to charging of low interest rate while giving loan to 14 companies.
In October, the RBI superseded the boards of Srei Infrastructure and Srei Equipment Finance, appointed former Bank of Baroda executive Rajnish Sharma as its administrator, and sent the companies to the NCLT.
Based on the preliminary audit report of BDO India LLP, Sharma has filed an application with the Kolkata Bench of the NCLT on June 10 regarding disbursements made to certain entities. Power Trust, Kanoria Foundation and its Trustees, India Power Corporation Limited, India Power Corporation (Bodh Gaya) Limited, Tuticorin Electricity Supply Pvt. Ltd., Bhaskar Silicon Pvt. Ltd., Green Utility Pvt. Ltd., Environment Energy Corporation India Pvt. Ltd., Meenakshi Energy Ltd., Devi Trading & Holding Pvt. Ltd. and certain other entities as reported by the Transaction Auditor. “It is to be noted that this transaction is a preliminary filing based on the report submitted by the auditor, and further filing may be done in due course,” the regulatory filing said on Monday.
An email sent to Sharma remained unanswered.