Cox & Kings money laundering case: ED detects fund diversion of Rs 7,000 cr

An earlier estimation from ED stood at about Rs 5,500 crore

The latest probe findings in the Cox & Kings Ltd (CKL) money laundering case revealed that the loan money that was siphoned off and diverted from various banks was to the tune of Rs 6,968 crore. 

 

Enforcement Directorate (ED) had earlier estimated the amount to be Rs 5,564 crore. The fresh findings were disclosed by the federal agency in its remand copy, which was submitted to the Mumbai sessions court on Friday while seeking custody of CKL promoter Ajay Ajit Peter Kerkar.

 

The agency had arrested Kerkar on Thursday and he was sent to ED custody till December 3. 

 

In its 21-page remand copy, ED alleged that Kerkar had obtained loans in at least five subsidiaries of CKL from YES Bank in collusion with the bank's co-founder Rana Kapoor. 

 

Business Standard has reviewed the ED remand copy.

 

YES Bank's total outstanding loans to CKL's subsidiaries stood at Rs 3642 crore, out of which Rs 1,997 crore was to three domestic entities and Rs 1,645 crore was to two overseas entities. 

 

“Peter Kerkar played an important role in connivance with Rana Kapoor, erstwhile chief financial officer (CFO) Anil Khandelwal and internal auditor Naresh Jain in borrowing of loans from YES Bank and other financial institution(s) for the purpose of working capital and business loans in Cox & Kings group of companies," ED said.

 

"Thereafter, Kerkar in collusion (with) Khandelwal and Jain diverted funds to their owned/controlled entities and siphoned the said borrowed funds for their personal gain," it said.

 

Both Khadelwal and Jain were held by ED last month. Kerkar's non-cooperation in the investigation is the rationale behind seeking his custody, ED said.

The remand copy stated that on the direction of Rana Kapoor, Kerker along with his other colleagues pursued the loan proposal of Ezeego. 

"He is required to be confronted with the other persons whose statements have been recorded so far during investigation under anti-money laundering laws. He is also required to trace the end-use of the huge amounts of monies which appear to have been laundered in this case for which they could not produce documents despite sufficient opportunity," the remand copy states.

ED informed the court it has the testimonies of senior executives of YES Bank, including its senior group president, who conceded that a loan proposal amounting to Rs 500 crore for its group firm Ezeego One Travel and Tours was received. 

“The loan was driven from the top and the very initial instruction had taken place between Kapoor and the concerned person of the company. That, his teams view against the proposal for extending credit facilities to Cox and Kings group was mainly due to weak credit position, compliance issue and non-availability to down sale the loan," the copy says.

CFO Khandelwal was driving the negotiation on behalf of Ezeego with YES Bank for credit facilities, ED remand copy quoted. 

Quoting Kerkar's statement, ED said that he met Rana Kapoor about six times, including in London, regarding the sanction of loans of CKL. Kerkar stated that the finances of CKL were controlled globally by Khandelwal. Jain and Khandelwal together with certain bank officials fraudulently diverted funds from CKL to Alok Industries Group, it said.

According to Kerkar, both of them borrowed Rs 1,114 crore in the name of Cox & Kings as an unsecured loan without the knowledge of the company's board of directors. They used the borrowed amount to evergreen the accounts of Alok Ind. Thereafter, Khandelwal illegally transferred large tranches of money from Ezeego to Redkite (another subsidiary) and had illegally opened an account in Axis Bank in the name of Ezeego. 

However, he was unable to ascertain the outstanding balance amount recoverable on account of trade receivables from related and unrelated parties (domestic & overseas), the outstanding loan from CKL subsidiaries, other advances to related parties, and so on, ED noted. 

"During the interrogation, Kerkar was unable to explain the reasons for non-current investment amounting to Rs 223.12 crore in domestic as well as overseas subsidiary/promoters group company, the trade receivable from related parties amounting to Rs 997.23 crore and unrelated parties amounting to Rs 1480.59 crore (both domestic and overseas), total loans to subsidiaries of CKL amounting to Rs 641.14 crore, other advances of Rs 417.39 crore and other current assets to related parties amounting to Rs 844.83 crore,” ED remand underlined.

Talking about the business operations, Kerkar gave an explanation saying that Ezeego is a company which is into the business of ticketing, and leisure tours and travels and has been into this business for the last 13 years or so. "It is a completely separate independent legal corporate entity from Cox & Kings having separate staff, offices and management. Ezeego did have a business relationship with Cox & Kings wherein both companies on certain occasions partnered with each other for the purpose of conducting the business of travel and tourism."

ED further quoted, "The monies siphoned from Ezeego to various entities owned by Khandelwal and Jain were used to acquire premises no. 801 and 8O2 at Peninsula Business Park at Lower Parel as well as several flats in Omkar Chambers. Kerkar also claimed that the sale proceeds of the education business of holiday break which was sold for GBP 460 million in January 2019 were not reported to the Yes Bank."