Religare Finvest Case: Securities Appellate Tribunal Directs SEBI To Pass Fresh Order
A guard walks around the reception area of the Religare Enterprises Ltd. office in New Delhi, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Religare Finvest Case: Securities Appellate Tribunal Directs SEBI To Pass Fresh Order


The Securities Appellate Tribunal has directed Securities and Exchange Board of India to pass a fresh order in Religare Finvest's fund diversion case and asked the company to maintain Rs 200 crore in assets for a period of three months.

The order follows an appeal filed by Religare Finvest against an interim order passed by SEBI in October 2018 as well as against the confirmatory ruling of SEBI in March 2019. The company is a subsidiary of the Religare Enterprises Ltd. and was promoted by the Singh brothers—Shivinder and Malvinder.

The issue pertains to the affairs of Fortis Healthcare Ltd., which were being managed by the Singh brothers, the former promoters of the hospital operator. It was alleged that the duo siphoned off the funds of Fortis Healthcare to promoter-related entities through layers of companies which were controlled by them.

SEBI had in October 2018 directed Fortis Healthcare to recover Rs 403 crore, along with interest, from Religare Finvest and other entities. Also, it had said that Religare Finvest was jointly liable to pay this amount along with other entities. Religare Finvest and other entities were also restrained from disposing assets pending investigation.

The regulator had noted that according to the forensic auditor report, Religare Finvest had received a sum of Rs 200 crore from three companies—Best Healthcare, Fern Healthcare and Addon Realty. Thus, Religare Finvest was a beneficiary of the Rs 200 crore which they were liable to refund. However, Religare Fivest had vehemently contended that the three companies had not transferred the funds to it.

After giving them an opportunity to present their case, SEBI in March 2019 had said Religare Finvest failed to rebut the prima-facie findings and the allegations made against it in the interim order.

It also asked Religare Finvest, along with Religare Enterprises, to recover over Rs 2,000 crore that were diverted to Singh brothers and 21 other entities.

"It was observed that funds amounting to Rs 2,315.09 crore had been diverted from the books of RFL for the utilisation of promoters and promoter group entities of REL," the regulator had said in the order.

Further, SEBI had said that the detailed investigation in the matter was still in progress which was supposed to reveal all the layers of the alleged fraud as well as expose the specific role of each entity.

It was contended by Religare Finvest that in one order SEBI directed the company to refund Rs 200 crore and in another ruling it had asked Religare Finvest to recover over Rs 2,000 crore from the same companies and, therefore, urged that contradictory orders have been passed without considering the material and evidence provided by it.

However, SEBI justified its interim order on the grounds that the objections raised by RFL were considered. The regulator's counsel further contended that the second order passed by Sebi was in relation to another investigation against another entity.

"Whereas in the impugned order the order was passed in relation to the affairs of the FHL and the second order of the same date was passed in the matter of REL and, therefore, the issue relates to two different, distinct companies even though some of the entities may be common," SEBI contended.

"The whole-time member has passed two orders which appears to be contradictory to each other. In the impugned order, the appellant is required to refund a sum of Rs 200 crore which is alleged to have been paid by the three companies,” SAT said after hearing both parties.

“In another order, the whole-time member has directed the appellant to recover more than Rs 2,000 crore some of which from two of the companies mentioned in the impugned orders," the appellate tribunal added.

"The impugned orders cannot be sustained and are quashed in so far as it relates to the appellant. The matter is remitted to the WTM to pass a fresh order if they so desire after giving an opportunity of hearing to the appellant," it added.

In order to balance the equities, SAT has directed Religare Finvest to maintain its assets worth Rs 200 crore for a period of three months.

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