Religare Finvest gets relief from appellate tribunal in fund diversion case

Tribunal pulls up Sebi for passing contradicting orders

Religare Finvest, an arm of Religare Enterprises, has obtained relief from the Securities Appellate Tribunal (SAT) in a fund diversion case, involving erstwhile promoters Shivinder and Malvinder Singh.

In an order dated October 17, 2018, the Securities and Exchange Board of India (Sebi) had held that Religare Finvest was liable to pay over Rs 200 crore to Fortis Healthcare, from where the Singh brothers had allegedly siphoned off funds through a layer of companies controlled by them.

The regulator had held that Religare Finvest was beneficiary of this diversion and hence was liable to refund.

In another order dated March 14, 2019, Sebi’s whole-time member (WTM) directed Religare Finvest to recover Rs 200 crore given as loans to the companies belonging to the Singh brothers.

“It was contended that in one order the WTM had directed the appellant to refund the amount and in the other order, the WTM directed the appellant to recover the amount from the same companies. Therefore, (it was) urged that contradictory orders have been passed without considering the material and the evidence that was filed by the appellant,” said SAT in an order.

Following the Sebi orders, Religare Finvest submitted documents to show that Rs 200 crore it had received from the companies belonging to the two brothers was on account of repayment of loans. It argued that it didn’t owe any money to Religare Healthcare.

Sebi said Religare Finvest’s arguments were as ineffective. It further argued that the October and the March orders were related to two different companies, even though some entities were common.

“We find that the impugned orders cannot be sustained,” the SAT held after hearing both Religare Finvest (appellate) and Sebi (respondent) at length.

"The submission of the appellant contending that it had never taken a loan or borrowed the money from the companies has not been dealt with by the WTM,” it said.

The tribunal criticised Sebi for setting aside Religare Finvest’s submissions merely by saying it “failed to effectively rebut the prima-facie finding.”

The SAT directed Sebi to provide detailed reasoning.

“We may remind that the respondent is a quasi-judicial authority and is required to give reasons while passing the order. The impugned order does not contain reasons nor deals with the submissions and, therefore, we are of the opinion that the impugned order was passed without any application of mind,” it said remitting the matter to Sebi.

It said Sebi's WTM “can pass a fresh order if it so desires after giving an opportunity of hearing to the appellant.”

The SAT, however, asked Religare Finvest to maintain its assets worth Rs 200 crore for three months. “If the WTM is unable to pass the order within the aforesaid period, this limited restraint order that we have passed will come to an end,” the tribunal added.