YES Bank fraud case: ED searches Cox & Kings top brass for siphoning funds

ED is investigating how the bank sanctioned the loans and whether the travel firm’s promoters siphoned off the money | Enforcement Directorate logo
Widening its investigation into the YES Bank fraud case, the Enforcement Directorate (ED) on Monday searched five premises of the promoter, directors, and auditors of outbound travel firm Cox & Kings. This was in connection with the tour operator’s financial dealings with Rana Kapoor, the co-founder of private lender YES Bank under judicial custody for alleged money laundering. 

According to the federal agency, outstanding loans aggregating Rs 3,642 crore sanctioned to the travel firms showed ‘irregularities’. 

“During investigation, irregularities were noticed in relation to the loan sanctioned to Cox & Kings Group. The group had created multiple layers of onshore and offshore subsidiaries across the globe through which the monies were siphoned off,” said the ED. 

The search operation followed a formal complaint filed by YES Bank on March 18 against the travel firm. “We have so far searched the offices and residences of promoter Ajay Ajit Peter, director Pesi Patel, chief financial officers Abhishek Goenka and Anil Khandelwal, and auditor Naresh Jain,” said an ED official.  

Sources say this action is part of ED’s probe in a case involving half a dozen YES Bank borrowers with total loan claims of about Rs 30,000 crore. The ED is investigating how the bank sanctioned the loans and whether the travel firm’s promoters siphoned off money. It is also examining illegal quid pro quo and suspected kickbacks in credit extended during Kapoor’s tenure at the bank.

Sources indicated that the investigation will reach out to all borrowers summoned by the agency, but their questioning was postponed due to the Covid-19 pandemic. The agency is preparing a supplementary charge sheet that will include its findings on the bank’s borrowers.

Explaining the break-up of the outstanding loans, the ED said Cox & Kings borrowed Rs 563 crore; its group firms Ezeego and Cox & Kings Financial Service borrowed Rs 1,012 crore and Rs 422 crore, respectively. Its two UK-based entities — Prometheon Enterprise and Malvern Travel — owe dues of Rs 1,152 and Rs 493 crore each. 

The ED action was triggered after it got custody of some crucial documents and audit reports highlighting the roles of Cox & Kings promoter, executives, and its entities.

Findings says Malvern Travel, with an outstanding of Rs 493 crore, submitted the forged bank statement and certificates of BDO LLP (statutory auditor) to avail of the said loans from YES Bank. This forgery was pointed out by KPMG, which is the administrator of this UK-based entity. 

In relation to Cox & Kings, the company forged its consolidated financials by counterfeiting the balance sheets of overseas subsidiaries.

Even Prometheon Enterprise uses the fictitious domain name impersonating the current officials of Raffingers UK LLP, (statutory auditor). For this, Raffingers UK LLP filed a criminal complaint to the National Crime Agency in the UK.

After default by Cox & Kings, the lenders appointed PwC for forensic audit, but the management did not cooperate. However, based on the limited data available, the audit confirmed falsification of accounts, overstating sales figures, understating debt figures, fictitious transactions and so on. 

The audit highlighted that between 2014-15 and 2018-19, sales of Rs 3,908 crore were made to 15 non-existent/fictitious customers. 
A majority of collection shown in ledgers from Ezeego (another group entity) was not found in the bank statements. Another 147 sets of customers are also suspicious and non-existent. The audit further says Anil Khandelwal diverted Rs 1,100 crore to Alok Industries without any board approval.

Cox & Kings Group sold Holiday Break Education, another subsidiary, for Rs 4,387 crore. Instead of discharging liability of the bank, it siphoned off a majority of the money. From this siphoning, $15.34 million was transferred to Kuber Investment Mauritius, which was controlled by Peter Kerker.

 From Ezeego, Rs 150 crore was diverted to Redkite Capital Private, which was promoted by Anil Khandelwal and Naresh Jain (internal auditor of Cox & Kings). This fund diverted to Redkite was used to buy controlling stake in Tourism Finance Corporation of India, a listed non-banking financial company.

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