RHC Holding - the holding company of Singh brothers Malvinder and Shivinder - has sent legal notices to Religare Enterprises and Religare Capital Markets Ltd, demanding a refund of over Rs 2,500 crore for alleged "cheating, fraud and breach of agreement". This may just be the beginning of the multiple legal battles that are set to unfold over how the Singh brothers, who lost the control of REL in February this year, lost Rs 22,500 crore in less than a decade.
In its legal notice, RHC Holding has accused the REL management of persuading the Singh brothers to set up and finance a subsidiary firm called Religare Corporate Services Ltd (RCSL) - currently known as Finserve Shared Services Pvt Ltd. RCSL was set up in 2011 and RHC Holding invested Rs 839 crore by way of equity, preference shares and debt . The REL management had assured 18 per cent interest on the investment and buyout off all preference shares owned by the Singh brothers.
However, the company management unilaterally terminated the agreement and transferred all the corporate functions of RCSL to REL in 2015, the notice said. The RHC Holdings termed the termination of agreement as malafide, fraudulent and amounted to criminal breach of trust.
It said: "RCSL was incorporated by my client (the Singh brothers) and financed by them, on the basis of the express representation and inducement on behalf of the company (REL) that the promoters will be fully compensated along with the IRR of 18 per cent per annum for the funds provided by them (the Singh brothers)."
"However, in order to evade performing your part of the bargain as undertaken and represented by you, related to the buying out of the investment in FY 2017, you deliberately and malafidely pre-emptively terminated the master services agreement and contrived to escape your obligations," RHC Holding said in its notice to REL. The RHC Holding has given 30 days to REL to pay back a total sum of Rs 1,430.85 crore on account of the investment and 18 per cent interest.
In another notice to Religare Capital Markets Ltd, the RHC Holding said that it had invested Rs 1,333.47 crore in RCML in various tranches between the FY 2011-12 and 2015-16. However, the RCML suffered a huge loss of over Rs 731 crore on account of the provisioning /write off of amount equal to the amount of investments made by RCML in Religare Capital Markets International (Mauritius) LTD.
"Such colossal losses have cast an enormous doubt over the ability and intention of REL and RCML to pay the promised benefits in terms of the arrangement (amongst RHC Holding, REL and RCML)," the notice said. It further said that the Singh brothers were clearly hoodwinked by REL and RCML into believing that the business of RCML was profitable and valuable and the investment made by RHC Holding would yield the promised returns.
RHC Holding has asked RCML to pay Rs 1,062.88 crore (Rs 524.47 crore along with premium of Rs 538.41 crore) till March 31, 2018. In case the REL and RCML fail to pay the amount within 30 days, the RHC Holding has threatened to initiate legal proceedings.