The Special Fraud Investigation Office (SFIO) has claimed that the three independent directors — Suresh Senapati, Gautam Mukkavilli and Sanjay Rishi — of Nirav Modi’s flagship company, Firestar International, failed in their duty as “mentors” and “risk mitigators” for the firm’s shareholders.
SFIO in its status report on role of independent directors of the flagship companies of the absconding diamond trader, which was submitted to the ministry of corporate affairs (MCA) last year, accused these directors of turning a “blind eye” to the “misgivings and manipulations” of Modi.
“SFIO has come down heavily on them. It said these directors with their qualifications and experience had enough information to gauge that operations of Firestar were mired with camouflaged and non-disclosed related party transactions with overseas entities who were a mere front of Modi,” the report, which was seen by FE, revealed.
People in know of the developments said that all the three directors responded to the charges made by SFIO in court and that they do not agree with its contents. They declined to comment on the story as the matter is sub judice.
Senapati, former chief financial officer of Wipro, was a non-executive independent director of Firestar International from July 29, 2015 to February 5, 2018. Mukkavilli, who was earlier a senior vice president with Pepsico India, was the director from October 17, 2016 to February 7, 2018, while Rishi, former executive vice president with American Express, USA, was the director from December 6, 2016 to February 7, 2018.
In February last year, the government ordered a probe into affairs of 40 companies and 4 LLPs directly or indirectly controlled by Modi, including flagship firms – Firestar International and Firestar Diamond. The investigation was ordered following a FIR by Punjab National bank against Modi and his uncle Mehul Choksi. Both the flagship companies of Modi have an exposure of over `4,000 crore from a consortium of banks.
SFIO during its investigations summoned Senapati, Mukkavilli and Rishi and recorded their statements in April-May 2018. Senapati attended 20 board and committee meetings during his tenure with Firestar International, while Mukkavilli attended 7 audit committee and 1 compensation committee meeting. Rishi attended 10 board meetings of which 4 were in person.
All the three directors with Firestar International have a background in finance and management with proven credentials. They were brought in to give credibility and as a precursor to the planned initial public offering, the report said.
Soon after or just before they joined the company, the Directorate of Revenue Intelligence probed Modi in December 2014 and there was a search & seizure by the IT department in January 2017. It exposed incriminating wrong doings in Firestar, which was discussed in the Board’s audit committee meetings, of which all three were members. Minutes of these meetings do not reflect that they took concrete measures to ensure that such malfeasance activities were stopped, it added.
The KYC report of major customers and suppliers of Firestar, presented by Aneja Assurance in August 2016, which was repeatedly presented by the statutory auditors, Deloitte Haskins and Sells in the audit committee meetings, of which Senapati was the chairman, pointed to dubious credentials and background of the overseas customers and suppliers.
The report revealed that Deloitte’s audit team in its meeting, on October 28, 2016, stated that audit committee’s chairman was fully involved in discussions on concentration of sales and purchases and had conducted on-site interviews with owners or CEOs of the overseas entities doing business with Firestar. The independent directors accepted the management responses on the same without any objections or proposing any remedial measures, which raises a stink.
SFIO report states that the independent directors failed in their role, duties and responsibilities under the Companies Act, 2013 of being a watchdog, mentor, risk mitigator and overseer for the various stakeholders. They turned a blind eye to the manipulations of Modi in Firestar International’s operations. This is in violation their roles.