Religare ex-CMD writes to EOW: Siddharth Mehta connived with Singh brothers to siphon off funds

Mehta was appointed non-executive, non-independent director of REL in February 2018 and was reappointed in September 2019 as its non-executive, non-independent vice-chairman.

Mehta was appointed non-executive, non-independent director of REL in February 2018 and was reappointed in September 2019 as its non-executive, non-independent vice-chairman. Former Religare Enterprises (REL) chairman and MD Sunil Godhwani has filed a complaint with the Economic Offences Wing (EOW), alleging that Siddharth Mehta, current non-executive and non-independent vice-chairman of REL, was actually a close associate of erstwhile promoters Malvinder Mohan Singh and Shivinder Singh and had connived with them to siphon off money.

Godhwani, who is in judicial custody with the Singh brothers in a fraud case at REL arm Religare Finvest (RFL), has made the sensational claim that under a conspiracy, Mehta and some others, in connivance with the Singh brothers, first “battered” the share prices of REL and simultaneously bought them at low prices and subsequently got the new board of REL installed in February 2018 to make it appear like an “independent and uninfluenced transaction”.

“This helped them to ensure that no coercive steps are taken by the RBI, as if the licence of Religare would have been cancelled, it would have become a dead wood,” Godhwani said in a December 3 complaint, a copy of which is reviewed by FE. “By doing this, they ensured that REL remained in the hands of the same group (even though) optically under the new management, and, thus, would also help Malvinder Mohan Singh and Shivinder Singh in the Daiichi case.” If anything would have been sold on profits by the Singh brothers, the proceeds received by them would have got attached in the court proceedings in the Daiichi case (hence the sale of shares to “associates” at throw-away prices), Godhwani alleged.

Godhwani alleged that the current management of REL and RFL is nothing but an “alter-ego” of Mehta, who is a founder of Bay Capital and India Horizon Fund. Bay Capital and its associate firms are significant minority shareholders of REL.

Mehta was appointed non-executive, non-independent director of REL in February 2018 and was reappointed in September 2019 as its non-executive, non-independent vice-chairman.

In an email reply to FE’s queries, Religare didn’t respond to any of the allegations made by Godhwani. It said: “A response has been sought from us without sharing a copy of the complaint. The queries are quite subjective and in the absence of access to the complete complaint, it is extremely unfair to reach out to us for our comments, as this denies us an equal and fair opportunity to offer a fit and appropriate response, that too, when the matter is subjudice.” The company, however, responded to Godhwani’s allegations with counter-allegations, saying that this is a “deliberate and desperate attempt by him to not only delude the law, but also malign the reputation” of the management professionals and the board members. The FIRs against the Singh brothers, Godhwani and others, REL claimed, had been brought about due to the efforts of the current board and management.

REL and RFL had reportedly lodged a complaint against the Singh brothers and Godhwani with the corporate affairs ministry in December 2018. It had claimed that RFL had sanctioned loans to companies known to the Singhs, which were not repaid. The loans stand at Rs2,397 crore, with Rs415 crore as interest to as many as 19 entities.

In his complaint with the EOW now, Godhwani alleged that the Singh brothers started the sale of REL shares “surreptitiously” in 2017—their holding dropped from 50.89% as of June 30, 2017 to 13.06% by December 31 and further to just 3.08% as of March 2018. To circumvent Sebi’s mandatory open offer rule (for sale above 25%), “small numbers of shares were bought by various persons acting in concert with Siddharth Mehta”, Godhwani claimed.

Share prices were battered down to just Rs 52.50 per share (with a market cap of just Rs800 crore), “when clearly the value of REL, with its subsidiary business of Religare Finvest, Religare Housing Finance and the brokerage firm was in excess of Rs3,000 crore”. “This effectively meant that a company having high net-worth was virtually sold off at a throw-away price at the behest of (the Singh brothers) and their associates….”

According to Godhwani, the Singh brothers had also sold 52.2 lakh REL shares worth Rs183.74 crore (Rs352 per share) in 2013 to India Horizon Fund, allegedly a hedge fund operated by Bay Capital, which was founded by Mehta. He started acquiring REL shares not directly in his own name but through India Horizon Fund and even Mehta & Mehta Real Estate Pvt ltd. If these entities (in which Mehta is purportedly associated with directly or indirectly) were buying shares directly from the Singh Brothers, and not from the company, it’s not possible that they didn’t do any due diligence, Godhwani alleged, hinting at Mehta’s close association with the brothers.

Godhwani also alleged that the Singh brothers were constantly asking for inter-corporate deposits (ICDs) and had the ultimate say because the board consisted mostly of people close to them. In its inspection of RFL in 2015, the RBI red-flagged concerns about the ICDs and in 2016, the central bank called a joint meeting of RFL and REL. In a letter to the RBI on July 12, 2016, REL and RFL committed a reduction of the corporate loan book. Godhwani claimed that in August 2016, thanks to pressure exerted by him, a repayment plan over the next 18 months was given.

However, his insistence on greater accountability by the Singh brothers resulted in his demotion twice in 2016, first from the post of the CMD of REL to CEO and whole-time director and then to just non-KMP whole-time director on October 21, 2016, Godhwani claimed.