By Mithun Dasgupta and Joydeep Ghosh
The Kanorias, former promoters of Srei, have dismissed the Reserve Bank of India-appointed administrator Rajneesh Sharma’s exchange disclosure indicating a ‘Rs 1,500-crore fraud’.
“The act of the administrator was malafide and for the sole purpose of prejudicing the company and its promoters,” erstwhile promoter Hemant Kanoria stated in a letter to Sharma.
Kanoria said that the filings and reports were based on an audit of BDO, “which is not even an audit firm, but a consultancy organisation”. The letter says the audit was conducted “in an unfair manner, unilaterally and against the principles of natural justice”. The letter also says that the process being followed by the administrator was contrary to the insolvency code.
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In an exchange disclosure on October 21, the administrator quoted forensic auditor BDO India as indicating that at least five loan transactions involving around Rs 1,500 crore were fraudulent in nature. He claimed that these transactions, by Srei Equipment Finance, a wholly-owned subsidiary of Srei Infra Finance, took place from 2013-14 to 2020-21.
The loans in question were given to Aviral Maritime, Adinath Ports, Kitply Industries, Swachh Group, Whitefield Paper Mills and Bengal Industrial Infrastructure.
Srei sources say that BDO is a consulting firm with no audit experience and is not even registered with the Auditors Association (AASB) and NFRA (National Financial Reporting Authority). In addition, they say that out of the four loans in question, two were given in the routine course of business interest rates ranging around 12-13%. Hence, there was no question of fraud. Further, these loans were paid back on time. And the administrator has recalled two wrongly tagged fraud loans that they were unable to comprehend the complexities of infra financing.
Sources close to the matter told FE that the administrator has received the letter from Kanoria. “As per the report of transaction auditor BDO, the administrator has filed some cases before the Kolkata bench of the NCLT under Section 66 (IBC). Then the erstwhile management has reacted on it,” said the sources.
The auditor named both the promoters – Hemant Kanoria and Sunil Kanoria – for their involvement in these transactions apart from the ‘beneficiary’ firms. The biggest transaction involving Rs 838 crore was loan disbursement to Aviral Maritime Infrastructure Dahej Private and Adinath Port and Logistics.
Refuting the charge, Kanoria’s letter says: “Since the report of said transactional auditor, namely BDO, is yet to be validated by the tribunal, your act of intimating/informing/disclosing any information which is pending adjucation could not have been made by you as the same is not permissible by the provisions of the Code.”
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The letter added: “You are espousing a personal vendetta and your allegations made against the parties is meritless.”
Kanoria’s letter also said that if the report is not withdrawn immediately, the promoters will take appropriate action advised by law.
Insolvency proceedings against Srei Infrastructure Finance (SIFL) and its subsidiary Srei Equipment Finance (SEFL) commenced from October 2021 after the insolvency petitions, filed by the RBI, had been approved by the NCLT Kolkata bench. Sharma, former CGM of Bank of Baroda, took charge of the two Srei companies after the central bank had come down heavily on both the companies over governance issues and superseded the boards of directors.
