CBI probe ordered against SKS Power and its affiliates

The Allahabad High Court (HC) has directed the Central Bureau of Investigation (CBI) to probe SKS Power Generation Ltd (SKSPGL) and its affiliated companies, allegedly involved in the illicit transfer of substantial funds to the British Virgin Islands and Bermuda through illegal channels disguised under the facade of fraudulent offshore entities. It also ordered the CBI to investigate the role and complicity of bank officials who facilitated the approval of loans and subsequent auction proceedings in favour of Agritrade Power Venture Pvt Ltd.  

The court directed the Serious Fraud Investigation Office (SFIO) to conduct forensic audits and other necessary investigations against SKSPGL and its associated companies. As per the order, the associated companies of SKS Power Generation to be investigated include Agritrade Resources Ltd, Entwickeln India Energy Private Ltd, Agritrade Power Venture Pvt Ltd, Fair Thermal Power Ltd, Shree Krishan, Citywings, Compact Agencies and Labheshwari Agencies Ltd, Asia Power FDI Ltd, and SKS Ispat and Power Ltd. 

While SBI was instructed to safely maintain the original records and make them available to the investigating agency upon request, market regulator Securities and Exchange Board of India (SEBI) was directed to provide all necessary assistance to the investigating agency and take necessary action, if required within their jurisdiction.

“In cases of corporate fraud involving the siphoning of large sums through offshore sham companies, deceptive share transactions, and the issuance of bogus Compulsorily Convertible Debentures, the involvement of specialized investigative agencies is warranted," observed the bench, comprising Justice Vinod Diwakar and Justice Vivek Kumar Birla., 

Stressing the assistance of regulatory bodies on the case, the court said: “Experts in forensic auditing, banking, law, information technology, investigation, company law, capital markets, and taxation, are required for detecting and prosecuting white-collar crimes/fraud in the interest of justice."

“Corporate fraud causes a significant threat to the integrity of financial institutions and government functioning," said the bench.

The order came following the filing of a criminal writ in the court by an activist, alleging that SKSPGL, in connivance with the bank officials and certain other unknown accused, caused losses to the tune of Rs 5,000 crore.  

The activist also alleged that SKSPGL misappropriated the loan funds taken from SBI and other financial institutions, through systematic corporate fraud. The misappropriation involved various methods, including transferring a significant portion of the loan amount to the tax havens of the British Virgin Islands and Bermuda through fictitious companies. Later, these funds, diverted abroad, were used to purchase SKSPGL’s assets in collaboration with bank officials, violating Reserve Bank of India (RBI) guidelines.   

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SKSPGL is a Chhattisgarh-based electricity generation and distribution company. SKSPGL obtained a loan of Rs 6,170 crore from a consortium of banks, including SBI, L&T Infrastructure Finance Ltd, PTC India Finance Ltd, and State Bank of Bikaner and Jaipur (SBBJ). SBI granted the maximum Rs 5,170 crore, L&T Infra Finance granted Rs 500 crore, PTC India Finance granted Rs 400 crore, and SBBJ granted Rs 100 crore. 

The activist also alleged that SKSPGL initiated significant losses deliberately and stopped repaying its lenders. Later, SBI seized the company's assets and conducted a bidding process for sale. Agritrade Resources Ltd emerged as the successful bidder, agreeing to acquire ownership of SKSPGL through its subsidiary, Entwickeln India Energy, and assume the entire SBI loan of Rs 5,717 crore for a nominal sum plus an additional cash margin.

Incidentally, Entwickeln India Energy Pvt Ltd's holding company, Agritrade Power Venture Pvt Ltd, and its subsequent holding company, Fair Thermal Power Ltd, are incorporated in the British Virgin Islands, and Agritrade Resources Ltd incorporated in Hamilton, Bermuda, and listed on the Singapore Stock Exchange.

Entwickeln India Energy Pvt Ltd acquired all shares from SBI Trust at a significantly reduced price, with the bank allegedly waiving the interest rate on the loan and even reversing the entire interest amount of Rs 820 crore, considering it as deemed capital contribution from the holding company.

SKSPGL and its affiliated companies allegedly acquired compulsorily convertible debentures (CCDs) from Entwickeln India Energy at a significantly undervalued price. Consequently, SKSPGL became the holding company of Entwickeln India Energy Pvt Ltd, allegedly resulting in an illicit loss to the bank amounting to Rs 5,717 crore.

Earlier a court-directed FIR was filed in Jaunpur, Uttar Pradesh. The Economic Offences Wing (EoW) Varanasi Unit had investigated the case and filed a closure report and recorded the statements of suspect Deepak Gupta, Anil Mahaveer Gupta, Aneesh Gupta, Mahaveer Prasad Gupta, Premlata Gupta, Gopal Garg, Rohit Prashar, and AGM of SBI Bhopal. The EoW claimed the balance sheet of the company was scrutinised and the loan settlement agreement was looked into, but no illegality was observed during the investigation.

The Enforcement Directorate is already investigating Cethar Ltd, a company connected to this case.

According to the ED, the country's financial crime-fighting agency: “To be awarded the EPC contract of SKS Power Generation (Chhattisgarh) Limited (SKSPGCL) for about Rs 3,500 crore, Cethar Ltd had siphoned off Rs 228 Crore to SKS Ispat & Power Ltd. under the guise of investment in shares of the then parent company SKS Ispat & Power Ltd.”

The agency also said that this money was accounted as trade receivables until 2016-17 when it was written off as a loss on the sale of investments by creating backdated/forged agreements. This was done just two days prior to the commencement of NCLT proceedings revealing a heightened degree of criminal conspiracy.

”K Subburaj, Director of Cethar Ltd colluded with Anil Gupta, CMD of SKS Ispat & Power Ltd. with criminal intent to siphon off assets of Rs 793 crore from the books of Cethar which turned insolvent resulting in liquidation under the IBC, 2016," the ED said in a press release dated June 23. 

The ED has already attached assets worth Rs 517.81 crore of SKS Ispat & Power Ltd in the case, under the provisions of PMLA, 2002.