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The | Mumbai
Updated: April 24, 2020 10:07:31 am
Cox & Kings CFO Anil Khandelwal (left) and Promoter Peter Kerkar. (File photo)
Transactions worth Rs 21,000 crore over four years (2015-2019) made primarily to divert funds; falsification of records; a Rs 1,100 crore loan from a “brother to brother” that violated basic fiduciary rules; Rs 9 billion rupee sales to more than 160 clients that are false or non-existent, inflated bank balances and a series of defaults: these are among a series of alleged irregularities highlighted in the forensic audit of the travel company in bankruptcy Cox and Kings, The Indian Express has learned
Records of the audit, carried out in February 2020 by PricewaterhouseCoopers (PWC) at the request of the lender Yes Bank, and official records accessed by The Indian Express Detail how the company allegedly falsified records and dressed their figures in a showcase.
Cox and Kings, promoted and controlled by Ajay Ajit Peter Kerkar and his family, were sent to bankruptcy court in October 2019, after he did not pay. While the promoter group owns 12.20 percent of the company’s shares, the public owns the remaining 87.80 percent.
The travel and tour company owes Rs 5.5 billion rupees to banks and financial institutions and was one of the main borrowers of Yes Bank Ltd when co-founder Rana Kapoor ran it.
Yes, the Bank has an exposure of more than Rs 2,267 crore to Cox & Kings Group. Last month, Ajay Ajit Peter Kerkar was summoned for questioning by the Execution Directorate (ED) in relation to the money laundering case against Kapoor.
Kapoor, currently housed in jail, is accused of taking bribes instead of making loans to various companies that have now defaulted on payments.
Rana Kapoor is being brought by the ED to court in Mumbai. (Quick Stock Photo: Nirmal Harindran)
The forensic audit alleges that most of the transactions with related parties of Cox & Kings were executed without “proper approvals” from its board and without any loan agreement.
Investigation has found that Cox and Kings gave Rs 1,100 crore to Alok Industries, a stressed-out company that filed for bankruptcy in 2017, even when the travel company had no business relationship with the company.
Significantly, when the loan was awarded, Alok Industries’ Chief Financial Officer was Sunil Khandelwal, who is also the brother of Cox & Kings Chief Financial Officer Anil Khandelwal.
In addition to this, in fiscal year 2019 alone, Cox & Kings loaned Rs 589 crore to at least 11 related parties “without executing loan agreements.”
“Prima facie, it appears that these loans have been made to related parties without obtaining the required approvals / documentation, raising the suspicion that these transactions have been made with the intention of diverting funds,” the investigation report said.
Detailed emails with questions to Ajay Ajit Peter Kerkar, Anil Khandelwal and Cox & Kings received no response.
In fiscal year 2019 alone, Cox & Kings loaned Rs 589 crore to at least 11 related parties “without executing loan agreements.”
In 2017 Alok Industries was sent to bankruptcy court after failing to pay Rs 29.5 crore to banks and financial institutions, including the State Bank of India. The company was acquired by JM Financial and Reliance Industries Ltd for Rs Rs 5.05 billion in 2019 through the corporate insolvency resolution process.
The Cox & Kings audit report alleges that the company indulged in “falsifying” its financial statements between 2014 and 2019 by “exaggerating its sales figures and underestimating its debt.” He has also highlighted several “fictitious” business transactions. Consider your key findings:
2014 Between 2014 and 2019, the company made sales of Rs 5,278 million to 147 fake customers. Of these, at least 141 are not registered in the Goods and Services Tax (GST) department. At least six customers have included the GST registration number for Cox and Kings as their own registration number.
2016 Between 2016 and 2019, Cox & Kings made a substantial part of its sales of Rs 3,908 million Rs from 15 clients, which supposedly do not exist. A physical verification of the addresses of these clients found that they were residential addresses and that no travel agency operated from these locations.
UnqueAlthough Cox & Kings ledgers have recorded collections of Rs 2.548 crore from these 15 clients, the money was not tracked in their bank accounts as Cox & Kings received no actual funds. Between April 2014 and June 2015, Cox & Kings recorded sales of Rs 250-Rs 260 crore against each of these 15 clients. All these transactions were recorded “curiously” only the last day of the month.
👉🏽For fiscal year 2019, the company disclosed cash and bank balances of Rs 723 million and Rs 1.83 billion at independent and consolidated levels, respectively. Despite this, the company continued to default on the loan payment since June 2019, indicating that it had inflated its cash and bank balances, leading to manipulation of its financial statements.
👉🏽For fiscal year 2019, Cox & Kings reported the company’s total debt at Rs 2 billion rupees, while the company’s independent debt was Rs 3.6 billion rupees. Apart from this, a Rs 750 crore credit card debt was not disclosed to lenders, in violation of disclosure rules.
In January, the National Court of Company Law (NCLT), which hears insolvency cases, restricted Ajay Ajit Peter Kerkar, Urshila Kerkar, Anil Khandelwal, three other company directors and 16 employees who left the country without the permission of the court.
(Tomorrow: How a Cox and Kings company diverted loans to a front company run by its own employees)
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