Authored by Amanda Ruth, law student from Government Law College Ernkulam

On March 7th 2020, the Central Bureau of Investigation (CBI) registered a case for alleged cheating, fraud, criminal conspiracy against Mr.Rana Kapoor, co-founder of Yes Bank, under the Prevention of Corruption Act and Indian Penal Code. He was arrested a day later.

According to the CBI, the co-founder, former Managing Director and Chief Executive of Yes Bank, Mr.Rana Kapoor during his tenure had extended credit facilities to Dewan Housing Finance Corporation Ltd (DHFL) through the Bank and in return made huge monetary benefits for his businesses run by him and his family. In addition to Mr. Kapoor’s name, his wife Bindu, three daughters– Rakhee, Roshini, and Radha–and three firms controlled by them, Morgan Credits, RAB Enterprises (India), and Doit Urban Ventures have also been named in the complaint.

In the First Information Report (FIR) it has been mentioned that the scam started between the months of April and June of 2018. Yes Bank had then invested in DHFL a sum of Rs.3700 crore in short term debentures. The Wadhawans in return allegedly paid Rs 600 crore to Mr. Kapoor and his family members in the form of loans to DoIT Urban Ventures. Another sum of 750 crore was granted by Yes Bank to a company managed by the Wadhawans.

The charge-sheet was filed by the Enforcement Directorate (ED) in May 2020. The total amount illegally gratified by Mr.Kapoor was stated to be around Rs.5050 crore. It was also alleged that there has been several irregularities in distributing bank loans to corporate entities as well as misuse of his position in addition to creating shell companies for laundering money. It was further alleged that tainted assets were also created.

The ED explained how Kapoor misused his official position to gain undue financial benefit for him and his family. The proceeds of the crime generated in this case travelled to main holding companies, including Morgan Credit, YES Capital and also to its subsidiaries Doit Ventures and RAB Enterprises. It was also alleged that he was the controlling authority and decision maker during the material period when the fraud was perpetrated. The proceeds of the crime had been siphoned off and laundered or concealed, or layered and integrated into the main financial system through the acquisition of properties.[1]

In June, the ED raided 5 premises of Cox and Kings in Mumbai. The officials said that  Cox and Kings was one of the top borrowers of the bank and the latter had an exposure of about Rs 2,260 crore to the company. The ED claimed the firm was found to be involved in the falsification of accounts, overstating the sales figures and understating the debt figures and fictitious transactions.[2]

ED then attached the assets of Mr,Kapoor as well as the Wadhawans. According to the agency the present market value of the assets attached in the case both in India and abroad is more than Rs 2800 crores.

The promoters of DHFL, Kapil and Dheeraj Wadhawan were arrested in May and were granted bail in August 2020 due to technical failure on the part of ED to file the prosecution complaint within the stipulated time of 60days. However, the duo remains in jail because of the case filed by the CBI in relation to the same matter.

In late September, the Securities and Exchange Board of India (SEBI) imposed a penalty of Rs.1 crore on Mr. Kapoor for not disclosing transactions made on behalf of Yes Bank to Morgan Credit, to the Board of Directors of Yes Bank. He also failed to inform the board of directors of YES Bank about his material interests in the transaction. SEBI stated in its order that by doing so, Mr.Kapoor created an opaque layer between him and stakeholders as well as failed in maintaining the expected operational transparency. The penalty was imposed for violating the provisions of the LODR (Listing Obligations and Disclosure Requirements) Regulation.

The CBI, in October, registered a criminal case against Housing Development and Infrastructure (HDIL) promoters along with former PMC Bank chairman and other directors of the firm, in an alleged Rs 200-crore misappropriation from Yes Bank, involving Mack Star Company. It has been alleged that loans taken for Mack Star were transferred to settle HDIL liabilities to Yes Bank without intimation to its majority stakeholders. The Yes Bank officials has thus dishonestly ignored the terms of Mack Star’s Articles that expressly prohibits the firm from availing loans without the approval of the majority stakeholders. The CBI conducted searches in nine locations which includes the residences as well as the offices of all those named as accused in the FIR.[3] The Mack Stars Auditor was charged with criminal conspiracy. The Central Agency stated that the majority shareholders were unable to discover all of these fraudulent transactions because of the involvement of the auditor as well.

[1] Accessed 18 October 2020

[2] Accessed 18 October 2020

[3] Accessed 18 October 2020

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