The Central Bureau of Investigation and the Enforcement Directorate have so far identified more than hundred shell companies floated by the family members of disgraced Yes Bank co-founder Rana Kapoor. CBI sources told Moneycontrol that these entities have been used by the banker’s kin as vehicles for various financial manoeuvres and fund misappropriations.
"Rana Kappor's family members have formed more than 102 companies in the last few years. They were used to build huge amounts of assets," the source said.
The CBI and ED have traced the details of these companies through director identification numbers (DIN).
According to another source, "Rana Kapoor's senior executive secretary Lata Dave affirmed this and said in her statement that these companies have been used only for buying properties and loans were taken from various financial institutions by pledging these assets."
The ED earlier found details of 78 companies where Kapoor's family members had majority shareholding. Roshni Kapoor mentioned in her statement that "all financial transactions were handled by my father (Rana Kapoor), and we just looked after other operations of business".
An ED source told Moneycontrol that he was surprised with the large number of companies created by such highly qualified bankers. “In the initial probe, we have found dummy directors also on the boards of these companies," the person noted.
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On March 13, the CBI registered a second case against Kapoor, his wife Bindu Kapoor, Bliss Abode and Avantha Realty in a case pertaining to purchase of one of the prime properties on Delhi's Amrita Shergill Marg.
The agency alleged that Kapoor conspired with other accused named in the first information report (FIR) to purchase a bungalow on Amrita Shergill Marg by paying only Rs 378 crore through Bliss Abode Pvt Ltd (BAPL), where Kapoor’s wife was one of the two directors. Thereafter, the property was immediately mortgaged to Indiabulls Housing Finance Ltd for a loan of Rs 685 crore.
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"Bindu Kapoor bought the prime property on 40, Amrita Shergill Marg through her company Bliss Properties Delhi Private Limited on account of a loan default by Avantha Realty. Yes Bank’s exposure to Avantha Realty was Rs 500 crore. Bliss bought this property by raising Rs 378 crore from Mumbai-based Indiabulls Housing," the CBI said.
Moneycontrol had reported on March 11 that the real estate deal was under the ED scanner.
Improper financial transactions
Some legal experts point out that there is nothing illegal in floating many entities. "It is surprising that without completion of an investigation and the examination of money trails, offence of money laundering can be concluded or even alleged against anyone. Ownership of many companies directly or indirectly is not same as money siphoning. The law permits one to own companies without active business operations or significant assets for tax management purposes, for holding investments or other legitimate transactions. Financial Action Task Force (FATF) and various judgments of the Supreme Court of India provide legitimacy to many such companies," said Sumit Agrawal, Founder of Regstreet Law Advisors, and a former Sebi official.
However, Amit Tandon, Managing Director of IIAS, a proxy advisory firm, told Moneycontrol: "In the past also, we have seen people maintaining a large number of companies to hide improper financial transactions. Like in the case of IL&FS fraud, more than 300 such companies were floated to hide financial deals. The investigation is now on the right track to find the reason for forming these companies".
The CBI alleged that the purchase of a property in the charge of Yes Bank was not disclosed by Kapoor to Management Credit Committee (MCC) and the bank’s board. MCC, headed by Kapoor, had granted approval for issuance of NOC for the sale of the property. The agency said that since Kapoor was under an obligation to disclose his interest in BAPL and above transactions to the above committee and to the board of the bank, there was a situation of conflict of interest and related party transaction and a clear violation of the bank's code of conduct as well as the provisions of the Companies Act, 2013.
However, after his arrest, Kapoor told Moneycontrol that he has informed about this deal to the board and the Reserve Bank of India and even the banking regulator approved of this deal.
But a CBI source said that "Kapoor never informed the board about his indirect shareholding in the company".
The Kapoor family-related firms took around Rs 2,035 crore loan from Indiabulls Housing Finance, including the BAPL loan, which is yet to be repaid. All these transactions are under the lens and the CBI has already started sending summons for interrogation.
The CBI has also obtained a production warrant against Kapoor to produce him before the CBI court and seek his custody.
The agency will produce Kapoor in court and take custody from police. Since he is in judicial custody, getting custody from police needed court approval.