Latest News | Slamming Auditor’s Report on Fraud Allegations, Former Srei Group Promoters Consider Legal Action

New Delhi, Jun 15 (PTI) The Kanoria family of Kolkata, the former promoters of the insolvency-linked Srei Group, have slammed the company’s transactions auditor’s report for labeling over 3,000 crore as fraudulent of rupees in loans to the power sector, saying legal options to challenge the report in court are being considered, sources said on Wednesday.

The Srei group of companies comprises Srei Infrastructure Finance Ltd (SIFL) and its wholly owned subsidiary Srei Equipment Finance Ltd (SEFL).

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The Reserve Bank had in October 2021 replaced the boards of directors of the two companies and appointed a director under its supervision.

He then appointed a three-member advisory committee to assist the administrator of the two firms in crisis.

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Srei Group companies have been strained during the coronavirus-induced lockdown as non-payment by its customers has led to asset-liability mismatches.

A professional agency, BDO India LLP (BDO or Transaction Auditor), conducts an investigation of the affairs of the company (Srei Equipment Finance) with respect to qualified transactions under Sections 43 to 51 and Sections 65 and 66 of insolvency and bankruptcy law. Code, 2016.

“The BDO report unfortunately showed that loans to the electricity sector labeled them as fraudulent, while many of them have either regularly repaid these loans or have requested restructuring due to the Covid problems of the last year.

“The Kanoria have decided to dispute the BDI report,” said a source close to the Kanoria family.

They can either challenge the BDO report in the Kolkata Bench of the National Company Law Tribunal (NCLT) where the insolvency proceedings are ongoing or they can go to the Delhi High Court.

Sources said the report, which attempted to portray regular business practices between power companies as fraud, also took an opaque approach, violating the principle of natural justice.

“It is a travesty of fate that auditors have become accustomed to publishing reports (previously from KPMG and now from BDO) that are inappropriate and one-sided, thereby causing damage to everyone’s reputation. report seems to have been written without having had any discussion with the former management or the borrowers,” said another relative of the Kanoria family.

The methodology adopted by BDO is clearly contrary to the principles of natural justice and fairness. Legal sources said the report would not stand up to scrutiny by the decision-making authority, the person quoted above added.

Earlier on Monday, Srei Equipment Finance said its administrator had received a report from the Transaction Auditor regarding certain fraudulent transactions in FY20 and FY21 with a monetary impact of over Rs 3,025 crore on the Srei Group. .

“As a result, the company administrator has received a first report from the professional agency appointed as auditor of the transactions, indicating that certain transactions are of a fraudulent nature, in accordance with Article 66 of the Code.

“Based on the investigation and observations of the auditor of the transaction, the administrator has filed a request regarding disbursements made to certain entities,” SEFL said in the filing through its parent company SIFL. .

The petition filed by the administrator was filed against 14 defendants, including Power Trust, Kanoria Foundation and its administrators, India Power Corporation Limited, India Power Corporation (Bodhgaya) Ltd, Tuticorin Electricity Supply, Bhaskar Silicon, Green Utility, Environ Energy Corp. India, Meenakshi Energy Limited, Devi Trading and Holding and certain other entities as reported by the auditor of the transaction.

Sources said these acquired reports are likely to impact ongoing resolution, or deter potential investors as well as erode value. Such reports were also embroiled in lengthy legal battles earlier.

According to the sources, the Kanorias have also asked the courts to intervene to ensure a transparent process and decision – after taking the views of all parties. Except for the courts, no other institution should have the power to declare anything or anyone fraudulent, they added.

The banks and auditors violated the legal basis of ‘innocence until proven guilty’ in their opinionated and questionable ‘judgment’ – acting as judge, jury and executioner of his reputation.

Banks need to act in a more balanced and judicious manner, they added.

(This is an unedited and auto-generated story from syndicated newsfeed, LatestLY staff may not have edited or edited the body of the content)

About Michael S. Montanez

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