Religare Finvest’s FIR Alleges Lakshmi Vilas Bank, Singh Brothers Siphoned Rs 800 Crore

Religare Enterprises Ltd.’s non-bank unit filed a complaint with the Economic Offences Wing of the Delhi Police alleging former promoters Malvinder and Shivinder Singh and The Lakshmi Vilas Bank Ltd. misappropriated nearly Rs 800 crore.

Religare Finvest Pvt. Ltd. alleged that the Singh brothers, who later lost control of their healthcare-to-financial services empire, in collusion with the bank caused an unlawful loss worth Rs 791 crore to the company and its stakeholders, according to the first information report filed on Sept. 23. BloombergQuint has reviewed a copy of the FIR.

The FIR comes when Lakshmi Vilas Bank is awaiting regulatory approval for its merger with Indiabulls Housing Finance Ltd. Separately, the Delhi High Court on Friday agreed to hear a petition alleging that Indiabulls Housing Finance gave loans to shell companies.

Religare Finvest filed the latest police complaint more than a year after it sued Lakshmi Vilas Bank to recover fixed deposits that the lender invoked to recover loans to Singh brothers. Separately, the market regulator, probing siphoning of funds by the erstwhile promoters, had asked Religare to recall loans worth over Rs 2,300 crore that were diverted to the brothers and 21 other entities.

The bank is committed to cooperate with the investigating agencies and regulatory authorities to bring out the “malicious attempts” by Religare Finvest to “mislead the public to cover up massive fraud indulged by their own promoters, employees and group companies”, Lakshmi Vilas Bank said in a statement.

BloombergQuint has emailed queries to the Singh brothers and the bank seeking their comments on the FIR. Their responses are awaited.

In the FIR, Religare Finvest accused the directors and certain employees of Lakshmi Vilas Bank, and RCH Holding Pvt Ltd. and Ranchem Pvt. Ltd.—investment arms of Malvinder and Shivinder Singh—of cheating, criminal breach of trust by the banker, criminal misappropriation and criminal conspiracy.

The allegations reiterate that Lakshmi Vilas Bank settled fixed deposits against loans taken by privately held firms of the Singh brothers when they were still in control of the financial services business. And Religare Finvest claimed that the bank did that without informing it or seeking its approval.

According to the FIR:

• On Nov. 1, 2016, Religare Finvest invested Rs 400 crore in two fixed deposits and Rs 350 crore on Jan. 9, 2017 in two other such deposits. The non-bank lender renewed the short-term deposits till July 2017, earning Rs 41 crore interest.
• The FDs didn’t have any security charge or lien against them.
• On July 31, 2017, Religare Finvest received a statement of accounts showing the bank moved the FDs to the company’s current account and debited Rs 723.7 crore.
• Following a legal notice, the bank on Sept. 13, 2013, agreed to restore the FDs retrospectively with interest paid.
• In December that year, the bank asked Religare Finvest to offer security against the FDs, to which the non-bank lender replied that the funds were free of lien.
• On Feb. 9, 2018, the bank informed Religare Finvest that firms RHC Holding and Ranchem had borrowed Rs 532 crore and Rs 174.8 crore, respectively, the same day Religare Finvest invested in fixed deposits.
• The company alleged that the bank had disregarded its confirmation that the deposits had not lien; and the application to create a security charge was not signed by an authorised representative of Religare Finvest.
• There’s no documentary proof of the company encumbering the fixed deposits towards loans taken by the Singh brothers.
• On April 24, 2018, Lakshmi Vilas Bank informed Religare Finvest’s auditors that it had adjusted the deposits against loans to the Singh brothers’ firms.

No notice or intimation was sent prior to the alleged misappropriation to Religare Finvest as required under law even if the FDs were placed as security, according to the FIR. The company said it had not pledged FDs against loans availed by the Singh brothers. And the bank adjusted the funds despite Religare Finvest’s legal notice for restitution of funds, it alleged.

Lakshmi Vilas Bank, in the statement, said RHC Holding and Ranchem were group companies with common promoters and the fixed deposits were created by Religare Finvest to create a security for those loans.

The bank said it was primarily in touch with the Singh bothers’ firms and there was no need to communicate with Religare separately as RHC Holding, Ranchem and Religare Finvest were part of the same company.

Religare Finvest also filed an interim application in the suit seeking attachment of the assets of the bank, its employees and directors in the Delhi High Court, the bank said. The court heard the matter for more than a year and when it reserved it for orders, the company withdrew it for “reasons best known to them”, the statement said.