The Reserve Bank of India-appointed administrator for two insolvent Srei firms, undergoing a corporate insolvency resolution process, has received multiple reports from transaction auditor BDO India that indicate there were certain transactions that were fraudulent in nature, under the erstwhile management. The total impact of these transactions amounted to close to Rs 1,500 crore.

The administrator, Rajneesh Sharma, had also earlier received reports from the transactional auditor, indicating that multiple transactions were fraudulent in nature. This time, the BDO reports indicated that loan disbursements made to Aviral Maritime Infrastructure and Adinath Port & Logistics under the erstwhile management were fraudulent in nature. Total impact of the transaction (excluding interest payment calculations) amounted to around Rs 837.75 crore. As per the report prepared by the auditor, the concerned transactions occurred during financial year 2018-19 to 2020-21.

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“Basis the investigation and observations of the transaction auditor, the administrator has filed an application in respect of disbursements made to Aviral and Adinath before the Kolkata bench of the National Company Law Tribunal (NCLT) under Section 60(5) and Section 66 of the Code (IBC) against the Aviral, Adinath, Hemant Kanoria, and Sunil Kanoria,” according to intimations made to the stock exchanges by Srei Equipment Finance, a wholly-owned subsidiary of Srei Infrastructure Finance.

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The transaction auditor’s reports to the administrator, Sharma, also indicated that certain loan disbursements made to Whitefield under the erstwhile management were also fraudulent in nature, and as per the preliminary estimation, monetary impact of the concerned transactions was around Rs 179.19 crore, on account of the gross outstanding including principal and interest recoverable from the customer, as on September 30, 2021, subject to the adjudication by the NCLT. The concerned transactions occurred during FY20 to FY21.

According to the stock exchange filing by Srei Equipment Finance (SEFL), reports from transaction auditor further indicated that loan disbursements made to Bengal Industrial Infrastructure (BIIPL), Kitply Industries and Swach Group of entities were also fraudulent in nature, and monetary impacts of the concerned transactions were at around Rs 26.14 crore, Rs 228.66 crore and Rs 221.10 crore, respectively.

Notably, earlier this year, BDO had indicated transactions amounts around Rs 5,000 crore as fraudulent in nature under the erstwhile management. Insolvency proceedings against Srei Infrastructure Finance (SIFL) and its subsidiary Srei Equipment Finance (SEFL), two NBFCs, commenced from October 2021 after the insolvency petitions, filed by the RBI, had been approved by the Kolkata bench of the National Company Law Tribunal (NCLT). 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.