Axis Bank has filed a police complaint against ex-Director of Reliance Commercial Finance Ltd (RCFL). Axis Bank has filed complaint against Devang Mody, a former whole-time director of Reliance Commercial Finance Ltd (RCFL), alleging deliberate diversion of funds disbursed under various credit facilities.
The Mumbai Police has started preliminary enquiry (PE) into the complaint. FIR has not been registered so far. A PE is conducted to determine whether a cognisable offence has occurred or not. If it’s established, an FIR is filed; if not, the case is closed for want of evidence.
The police have recorded statements of company executives and are likely to conclude the enquiry soon. Normally, the report is shared with the Commissioner of Police before deciding whether to convert the PE into an FIR.
The amount involved in the complaint is Rs 38.95 crore. Axis Bank said that Mody failed to disclose material financial information, violating loan terms and causing losses to the bank and the public at large.
As per the Reserve Bank of India guidelines, while the fraud classification of a resolved entity may be reviewed following a change in management under a resolution plan, criminal and penal action may continue against erstwhile promoters, directors and persons responsible for prior management.
Axis Bank, in its complaint, has sought registration of an FIR against Mody under Sections 61 (criminal conspiracy), 316 (criminal breach of trust), 318 (cheating), 336, 338, 340 and other relevant provisions of the Bharatiya Nyaya Sanhita, 2023.
Axis Bank has also shared details of the forensic audit report prepared by Grant Thornton India LLP. According to the report, RCFL allegedly availed credit facilities from 24 lenders under a multiple banking arrangement, with Bank of Baroda acting as the lead bank under an Inter-Creditor Agreement (ICA) signed on July 6, 2019.
A forensic audit commissioned by the lead bank in August 2019 highlighted several adverse observations regarding utilisation of loan funds towards servicing potential indirectly linked entities (PILE) and group companies. Circular transactions were also flagged.
The audit report stated that end utilisation of ₹4,766.62 crore was traced, of which around 39% (₹1,867.89 crore) was used for debt servicing of POLE and group companies. About 25% (₹1,199.29 crore) of transactions were identified as potential circular transactions routed back to RCFL, including ₹557.37 crore categorised as pass-through transactions where the end use could not be mapped.
More details will be released soon.
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