Samudra Mahal in Mumbai’s Worli is no ordinary building. Some of India’s most powerful and rich — and businessmen who have fallen from grace — own apartments or live in this tony residential complex. Fugitive diamantaire Nirav Modi was once a resident. So is Yes Bank co-founder and former CEO Rana Kapoor who is in jail on charges of money laundering.
Kapoor is the tenant of a palatial duplex owned by BJP leader Jyodiraditya Scindia. Until Kapoor’s exit from Yes Bank, this house often served as the unofficial headquarters for Yes Bank.
Kapoor was a generous host, throwing lavish parties to a long line of special guests, often discussing, and deciding, high-value corporate loan proposals over lunch. One of the former board members of Yes Bank first met Kapoor in the apartment. “Samudra Mahal was Yes Bank’s unofficial head office at one point. Even some of the key appointments happened here,” he said on the condition of anonymity.
These decisions have come under the gaze of India’s investigating agencies. Authorities are questioning Kapoor about his role in the collapse of Yes Bank under a pile of debt. One of India’s top private lenders, Yes needed a government-orchestrated rescue to stay aloft. While Yes Bank was sinking, Kapoor and his family were fuelling the unbridled growth of a business empire, according to the Enforcement Directorate, the agency that investigates financial crime in India.
Kapoor and family ran a byzantine collection of 101 companies from Samudra Mahal through three holding firms — Morgan Credits (MCPL), Yes Capital India (YCPL) and RAB Enterprises, according to ED. The holding companies ran businesses as diverse as real estate and renewable energy. No business was anathema to the Kapoors. Ecotourism? Check. Milk Products? Check. Art? Yes. The family even owned dry cleaning and laundry businesses.
Kapoor, wife Bindu and their daughters Roshni Kapoor, Radha Kapoor and Rakhee Kapoor held a total of 168 bank accounts in different banks.
Why did the Kapoors create such a huge collection of companies? What was the need for so many bank accounts? How and why the Kapoors created and ran these businesses, how they flouted rules, the questionable investments they made and the irregular alliances forged form the burden of the ED investigation against the family and an order to attach their properties.
Kapoor has denied any wrongdoing.
The family holding companies invested across 15 mutual funds and owned a collection of 59 paintings worth Rs 4 crore. There was a devoted room at Samudra Mahal to keep these paintings. Among others, the paintings include a portrait of the late Rajiv Gandhi by MF Hussain and paintings by Aslam Shaikh.
How did it all begin?
According to ED investigations, the Kapoor family began to build the web of companies from 1991. That was the year MCPL was formed. This holding company, however, remained inactive for about 12 years since inception.
YCPL, previously named DoIT Capital, was incorporated in May 2003. Later that year — Yes Bank was formed in 2004— both these companies were approved by Reserve Bank of India (RBI) as investment companies. The main source of investment in Yes Bank was the funds Kapoor received from the sale of shares to Rabo Bank Holland in the joint venture company, Rabo India Finance.
Rabo India was Kapoor’s first project in India and, in a way, the founding stone of Yes Bank. Rabo Bank held a majority 75 percent stake in this company while the remaining 25 percent was split among the three partners.
In 2002-03, Rana Kapoor and partners Ashok Kapur and Harkirat Singh exited selling the stake to Rabo Bank. In 2004, Kapur and Kapoor (minus Harkirat, who was sidelined) launched Yes Bank.
Yes Bank thrived until 2008 when Ashok Kapur was killed in the 26/11 terror attack. Kapoor ran Yes Bank with full control until 2018 when RBI finally forced his exit.
The nexus between the Wadhawans and the Kapoors
At 11 pm on March 6, 2020, the ED raided the duplex apartment at Samudra Mahal. The raid was a corollary of the investigations into a series of transactions between Rana Kapoor and the Wadhawans of DHFL Housing Finance (DHFL).
DHFL, once one of India’s top shadow lenders, itself collapsed. It faces bankruptcy proceedings and owes creditors around Rs 36,000 crore.
The Central Bureau of Investigation (CBI) said initial investigations by its economic offence wing into alleged deals worth Rs 5,050 crore found the Kapoor family received kickbacks in exchange for giving Yes Bank loans to the Wadhawans of DHFL through various channels and in gross violation of rules. Kapoor used his many companies to get undue benefits from the Wadhawans after influencing Yes Bank to extend large loans to DHFL and other Wadhawan companies by flouting rules, according to the CBI.
If charges against Kapoor are proved, the alleged nexus and loan- against-kickbacks in Kapoor-Wadhawan case will have strong parallels with the Chanda Kochhar-Videocon quid-pro-quo case. Kochhar, as ICICI Bank’s managing director and CEO, allegedly misused her official position and sanctioned Rs3,250 crore loans to Videocon’s Venugopal Dhoot in exchange of which Dhoot invested in a company floated by Deepak, Chanda Kochhar’s husband, according to investigating agencies.
Kochhar has denied doing any wrong.
The ED investigation also reveals how the loan-against-kickback deal between Kapoor and Wadhawan unfolded.
Transaction 1—loans from Yes Bank to Wadhawan companies
In April 2018, Yes Bank gave a loan of Rs 3,700 crore in short-term debentures to Wadhawan’s DHFL. This money has not come back to Yes Bank yet, according to the ED officials.
Yes Bank also sanctioned a loan of Rs 750 crore to one of the companies, Belief Realty (BRPL), owned by DHFL promoters Kapil Wadhawan and Dheeraj Wadhawan and their family members. This was taken for the Bandra Reclamation Project for SRA Re-development. But the whole amount was siphoned off by Kapil Wadhawan and Dheeraj Wadhawan through their shell companies and it was never used for the declared purpose. The entire amount was transferred to DHFL without making any investment in Bandra Reclamation Project for which the loan had been originally sanctioned, according to ED.
In fact, the loan risk team of Yes Bank had pointed out multiple and serious issues in the proposal. This included the fact that a majority of the project approvals were not in place. Also, the Letter of Intent (Lol) issued by SRA was for a carpet area of 1.3 lakh square feet whereas the proposal from BRPL had considered an area of 6.3 lakh square feet.
Despite these red flags, formal approval was given on June 18, 2o18 and carpet area considered was 5.5 lakh sq. ft. Adding to the opaqueness of the transaction, no external rating was called for on the BRPL. Immediately after disbursement of loan, the internal rating of the transaction was downgraded.
In other words, the standard process stipulated by the Yes Bank’s risk management division for valuation was waived and no end-use certificate was called for from BRPL. The loan was sanctioned at the insistence of Kapoor. All along, Rana Kapoor knew that the Rs 750 crore sanctioned to Belief Realtors for its Bandra reclamation project was not going to be used for the declared purpose, the ED has alleged.
Investigators say they have found that this transaction was triggered to siphon off the money from Yes Bank. The Rs 750 crore was sanctioned to the Wadhawan company without a penny being spent for the stated use.
Transaction 2: Kickbacks to the Kapoor family
The Wadhawans paid a kickback of Rs 600 crore to Kapoor and his family members under the garb of loan of the same loan from DHFL, according to the ED. This was given by DHFL to DoIT Urban Ventures, one of the companies owned by the family of Rana Kapoor. Kapoor’s daughters are 100 percent shareholders in DoIT through MCPL.
The Rs 600-crore loan was sanctioned by DHFL to DoIT on the basis of mortgage of sub-standard properties including 7.79 acres of land at Alibaug and 91.63 acres at Raigad. These land pieces had meagre value and loan was given considering its future conversion from agriculture land to residential land. Besides, Radha gave a personal guarantee showing a net worth of Rs 1,386 crore, according to ED documents.
Of the Rs 600 crore, DoIT used Rs 300 crore for repayment of an earlier loan. The remaining, the company said, is for general corporate purpose.
Against this loan, five properties were given as collateral to DHFL. At the Wadhawans’ instruction, DHFL valued these properties at their future development potential with the assumption that these agricultural lands will be converted to residential with permission of local authorities and will be used for construction and eco-tourism activity. At the time of giving loan, the purchase value of this land was only Rs 39.66 crore while the valuation done by DHFL was Rs 735 crore. This plot remains an agricultural land, according to ED.
The ED investigation said at no point, Rajendra Mirashie, president (project finance) of DHFL interacted with the three daughters of Kapoor, the owners of DUVPL. Marishie used to coordinate with Lata Dave, senior executive secretary of Rana Kapoor. Kapoor often talked to the Wadhawans directly and sometimes, with S Govindan, their executive assistant. The loan was structured in a way that the principal payment would happen only in 2023, 60 months after the date of disbursal as a bullet payment.
Additional reporting by Tarun Sharma.
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