- Bhushan Steel – Brij Bhushan Singal and Neeraj Singal, who have used illegal means to receive bank loans to the amount of INR 45,800 crore during 2013/14 and 2016/17.
- The investigation also discovered that these funds were transferred through a web of 157 companies.
- The investigation surfaced that by using fake documents, the Singals with the assistance of bankers and statutory auditors and other company staff managed to get a fund of up to INR 45,818 crore between 2013-14 and 2016-17.
Serious Fraud Investigation Office (SFIO) unearthed ex-promoters of Bhushan Steel – Brij Bhushan Singal and Neeraj Singal, who have used illegal means to receive bank loans to the amount of INR 45,800 crore during 2013/14 and 2016/17.
In the charge sheet filed by the SFIO, accused both the ex-promoters and several other Bhushan Steel top executives including former CFO Nittin Johari for illegally transferring funds from Bhushan Steel and Bhushan Energy for different purposes, also involving purchase of movable and immovable assets.
The investigation also discovered that these funds were transferred through a web of 157 companies, which were directly and indirectly controlled by the Singals. Out of 157 companies, 62 were controlled directly by Brij Bhushan Singal and Neeraj Sinagal. While 85 of the companies were operated by the employees of Bhushan Steel and Bhushan Energy and 8 other companies were run by entry operators.
The SFIO investigations sends strong signals out that due to transfer of funds by the promoters, company’s financial stability took a major drop and the company went into insolvency with outstanding liabilities of INR 56,000 crore.
The Illegal Practice
The founder of the group Brij Bhushan Singal and his son Neeraj Singal siphoned off the funds from Bhushan Steel and Bhushan Energy to its associated companies for capital advances. From these companies the funds were routed through more layers of companies and ultimately funds ended up being in Bhushan Steel as promoters equity. The funds were wired through web of companies in order to make it difficult to track the origin of funds.
Between 2009-2011, Bhushan Steel and Bhushan Energy transferred INR 1,770 crore via 32 associate companies controlled directly or indirectly by Singals. Out of 1,770 crore, INR 1150 crore was transferred through another 19 associated companies into the bank account of Uma Singal, wife of Brij Bhushan Singal. This amount was then transferred as investment in Bhushan Steel against issuance of preference shares to the promoters.
To bridge a gap for cash flow shortfall between 2013-2016, Bhushan still required loan of INR 6,900 crore. To meet the requirements of lenders, Singals used the transferred funds to the tune of INR 800 crore to show capital being funded in the company by way of issuance of equity and preference shares.
The probe also discovered that the promoters used INR 37 crore of the transferred money to buy properties in the name of partnership firm BN Associates in 2012-13. In another situation between 2015-2018, Bhushan Steel paid rent of INR 357 crore to 9 associated companies controlled by the Singals.
The firm also established companies abroad, which were controlled through the associated companies. These companies purchased goods worth INR 1,700 crore from Bhushan Steel between 2013-14 and 2017-18. The probe revealed INR 85 crore being still unpaid to Bhushan Steel by these companies.
Toying with banks
The rise of inflation in the Stock-in-Transit by the promoters to avail more drawing power against cash credit facility. The promoters took illegal advantage of letter of credit by attaching fabricated documents to get loan from banks.
The investigation surfaced that by using fake documents, the Singals with the assistance of bankers and statutory auditors and other company staff managed to get a fund of up to INR 45,818 crore between 2013-14 and 2016-17.
The SFIO probe accuses the board of directors, audit committee, key officials and statutory auditors of Bhushan Steel for performing their duties diligently.
The case is currently being held in a special court. Ranjana Roy Gawai of RRG & Associates law firm, which is representing the Singals and most of the main accused, when contacted, refused to make a comment saying that when a matter is sub-judice before a court of law, lawyer should refrain from making comments on the merits of the matter.
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