Religare fraud: What led to Singh brothers' arrest in the Rs 2,400-cr case

Former promoters of pharma major Ranbaxy, hospital chain Fortis and financial services firm Religare - Malvinder Mohan Singh and his younger brother Shivinder Mohan Singh  - were arrested by the Economic Offences Wing (EoW) of Delhi Police after some high octane drama for allegedly causing wrongful loss worth Rs 2,397 crore to Religare Finvest Ltd. Shivinder was nabbed in the afternoon, while his elder brother Malvinder was arrested in Ludhiana (Punjab) late night after a brief search.

Along with the Singh brothers, the police also arrested former Religare Finvest MD Kavi Arora, and former Religare Group CFO Anil Saxena along with former Religare MD Sunil Godhwani.

A statement issued by the EOW said, "The alleged persons having absolute control on Religare Enterprises Limited (REL) and its subsidiaries put Religare Finvest Limited (RFL) in poor financial condition by way of distributing the loans to the companies having no financial standing and controlled by the alleged persons. These companies wilfully defaulted on repayments, causing a loss to RFL to the tune of Rs 2,397 crore."

The brothers were in the news for siphoning money (around Rs 472 crore) from Fortis Healthcare, and for their legal tussle with Japanese drug major Daiichi in the recent times. A Singapore tribunal had passed a Rs 3,500 crore award in favour of Daiichi Holdings after it emerged that Singh brothers had concealed information about a US drug regulator probe that Ranbaxy was facing at the time it was sold to the Japanese pharma major.

Fortis had also written to market regulator Securities and Exchange Board of India (Sebi) earlier this year seeking the initiation of legal proceedings against the former promoters (Singh brothers), including arrest, to recover the dues (Rs 472 crore). Daiichi, too, is fighting to recover the award from Singh brothers and has urged the Delhi High Court to attach their properties/assets which may be used to recover the dues.

On Thursday, however, the two brothers were arrested for alleged fraud in relation of Religare Finvest and Lakshmi Vilas Bank (LVB).

How did this case unfold?

# In November 2016 and in January 2017 RFL invested Rs 750 crore in fixed deposits in LVB. It renewed the deposits till July 2017.

# In July 2017, RFL allegedly discovered that LVB had credited the proceeds of the FDs to RFL's current account and debited about Rs 724 crore without prior intimation to RFL.

# RFL says it intimated the bank through letters and legal notices demanding immediate reinstitution of the FDs. Following a legal notice, the bank agreed to restore the FDs retrospectively.

# Around December 2017, RFL claims it received a letter from LVB saying that certain loans was given to RHC Holding and Ranchem Pvt Ltd (Rs 532 crore and Rs 174.8 crore respectively) after allegedly considering the FDs as a security.

# RFL claimed that the FDs were lien free and it sought a confirmation on this from LVB.

# RFL claimed that LVB did not send any intimation on placing the FDs as a security against the loans given to RHC and Ranchem. RFL has not executed any documentation for pledging the FDs towards any loans availed by the above two companies.

# RFL eventually filed a suit against LVB in Delhi High Court

# In August, the Enforcement Directorate raided multiple premises linked to the Singh brothers. Raids were conducted at seven locations in Delhi.

# A day after RFL filed an FIR with the EoW of Delhi Police last September, the RBI placed LVB under its prompt corrective action framework. LVB, however, claimed that the RFL FIR had nothing to do with RBI action.

# On October 10, the Delhi Police arrested the two brothers along with their associates under section 409 (criminal breach of trust by a public servant, banker, merchant or agent) and section 420 (cheating) of the Indian Penal Code.