Srei group transaction auditor reports Rs 3,025 cr fraud in FY20 and FY21

Srei Equipment Finance said its administrator has received a report from the transaction auditor about certain fraud transactions in FY20 and FY21, bearing a monetary impact of over Rs 3,025 crore

Srei Equipment Finance on Monday said its administrator has received a report from the transaction auditor about certain fraud transactions in FY20 and FY21, bearing a monetary impact of over Rs 3,025 crore on the Srei group.

The Reserve Bank had, in early October last year, superseded the boards of Srei Infrastructure Finance Limited (SIFL) and its wholly-owned subsidiary Srei Equipment Finance Limited (SEFL).

It then appointed a three-member Advisory Committee to assist the administrator of the two crisis-ridden firms. Rajneesh Sharma, ex-chief general manager, Bank of Baroda, was appointed as the administrator to look into the affairs of the Srei group companies.

The Srei group companies, which are undergoing corporate insolvency resolution process, came under duress during the Coronavirus-induced lockdown, as non-payment from its customers led to asset-liability mismatches.

A professional agency, BDO India LLP (BDO or transaction auditor) is conducting an investigation into the affairs of the company (Srei Equipment Finance) in respect of transactions qualified under sections 43 to 51, and sections 65 and 66 of the Insolvency and Bankruptcy Code, 2016, Srei Infrastructure Finance said in a regulatory filing.

SIFL filing is on behalf of its subsidiary SEFL, which is an unlisted entity.

"Accordingly, the administrator of the company received an initial report from the professional agency appointed as the transaction auditor, indicating that there are certain transactions which are fraudulent in nature, as per Section 66 of the Code.

"Basis the investigation and observations of the transaction auditor, the administrator has filed an application in respect of disbursements made to certain entities," the filing said.

The application has been filed before the NCLT under Section 60(5) and Section 66 of the Code on June 10, 2022.

SEFL said the report relates to certain fraud transactions undertaken by the company during 2019-20 and 2020-21 and the monetary impact of these transactions on the listed entity (SIFL) is Rs 2,512.06 crore, being the amount outstanding in the books of the company as of October 8, 2021.

Besides, Rs 513.67 crore is the amount considered as due and outstanding towards notional loss to the company on account of fraudulently charging a lower rate of interest to certain entities referred to as the Power Trust group of entities, the filing said.

"Thus, the total impact of the transaction (excluding interest payment calculations) amounts to approximately Rs 3,025.73 crore," the filing said.

The application filed by the administrator has been against 14 respondents, including Power Trust, Kanoria Foundation and its trustees, India Power Corporation Limited, India Power Corporation (Bodhgaya) Ltd, Tuticorin Electricity Supply, Bhaskar Silicon, Green Utility, Environ Energy Corp. India, Meenakshi Energy Limited, Devi Trading and Holding and certain other entities as reported by the transaction auditor.

"All relevant details regarding these proceedings have been included in the application filed before the National Company Law Tribunal, Kolkata, and is presently pending consideration," SEFL said.