Srei's Hemant Kanoria to challenge report alleging fraud at group firm

Transaction auditor's methodology 'opaque' and legal fight over it could derail resolution process, say sources close to Kanoria.

Hemant Kanoria, the founder of Srei, will challenge a report by a transaction auditor alleging fraudulent transactions during FY20 and FY21 at a group company.

“We will be seeking legal recourse. We are exploring all legal channels,” said sources close to Kanoria about the report that said the transactions had a monetary impact of more than Rs 3,025.73 crore.

The Reserve Bank of India (RBI), in October 2021, superseded the boards of Srei Infrastructure Finance (SIFL) and Srei Equipment Finance Ltd (SEFL) on governance concerns and defaults and started a corporate insolvency resolution process (CIRP).

SEFL told exchanges on Monday it had an initial report from BDO India LLP, the professional agency appointed as the transaction auditor, indicating that certain transactions are fraudulent.

The administrator has appointed BDO to investigate SEFL in respect of transactions qualified under Sections 43 to 51, and Sections 65 and 66 of the Insolvency and Bankruptcy Code. 

The administrator, citing BDO’s investigation, has filed an application in respect of disbursements made to certain entities, referred to as the Power Trust group of entities, before the Kolkata bench of the National Company Law Tribunal (NCLT) under Section 60(5) and Section 66 of the Code on June 10, 2022, the exchange filing mentioned.

Sources close to the Kanoria said that the methodology adopted by BDO was “opaque” and a protracted legal battle with the agency could derail the resolution process.

The application filed by the administrator is against 14 respondents, including Power Trust, Kanoria Foundation and its trustees, India Power Corporation Limited, India Power Corporation (Bodhgaya) Limited, Tuticorin Electricity Supply Private Limited, Bhaskar Silicon Private Limited, Green Utility Private Limited, Environ Energy Corp. India Private Limited, Meenakshi Energy Limited, Devi Trading and Holding Private Limited and certain other entities as reported by the transaction auditor.

An exchange filing by SEFL had mentioned that this was an initial filing based on the report submitted by the transaction auditor and further filings may be undertaken, in due course.