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US-based investor alleges Religare's Singh brothers siphoned off $300 million to pay personal debts

US-based investor alleges Religare's Singh brothers siphoned off $300 million to pay personal debts

Religare promoters Malvinder and Shivinder Singh have now been accused of "diversion, siphoning and digression of assets" in a lawsuit filed in the Delhi High Court

Malvinder and Shivinder Singh Malvinder and Shivinder Singh

After an investigation carried out by the Reserve Bank of India (RBI) found that Religare Finvest Ltd, an investment arm of Religare Enterprises Ltd, rerouted $300 million to the privately-owned companies of the Singh brothers, Malvinder and Shivinder Singh, have now been accused of "diversion, siphoning and digression of assets" in a lawsuit filed in the Delhi High Court, a Bloomberg report said. In a statement, Religare said all the allegations against it are "completely baseless" and that the company would take a suitable legal action against the "relevant person".

The New York-based investor, who has six per cent stake in Religare Finvest, alleged the Singhs indulged in "diversion and siphoning" of funds to clear their personal debts of at least $1.3 billion. According to the RBI, the inquiry was conducted over Religare Enterprises' fiscal books of 2016. The Singh brothers, who own India's second-largest hospital chain, reportedly gave 21 loans worth millions to independent companies that rerouted at least $300 million to private firms linked to the brothers on the same day.

Here are the allegations made in the lawsuit against Religare Finvest

1. The plaintiff requested the court that Religare Finvest should be barred from lending money to the Singhs and that they should be restrained from selling the assets of the parent company, Religare Enterprises.
2. The lawsuit states the company would need to clear the liability being pursued through the arbitration case filed in the court by the investor, Siguler Guff & Co that has 6 per cent stake Religare Finvest, so that it should be restrained from lending more money.
3. The Singhs "have been camouflaging the diversion of funds from RFL to meet their personal liabilities under the guise of legitimate business operations" with the "sole purpose of unjustly enriching" the brothers, alleges the lawsuit seen by Bloomberg.
4. It also alleges that due to their systematic "plundering" of Finvest, the parent company Religare Enterprises would not be able to honor a provision in their agreement that allows the plaintiff to buy out its stake for $43.5 million.
5. Though the RBI was investigating its loan books for 2016 fiscal, Finvest still provided loans worth $76 million to the firms directly or indirectly "known" to the Singhs, alleges the investor.
6. The plaintiff indulged in the siphoning of funds through a controlled "special committee" that helped them circumvent the Finvest board on these dubious transactions.

Replying to the allegations, Religare said the company and its promoters are considering taking appropriate action against relevant persons for disparaging their reputation. "All the allegations made are completely baseless and have been responded to by Religare in the High Court of Delhi." The press release states the private equity investors in Religare Finvest, including the plaintiff, had their nominees appointed on the Board of Religare Finvest at the time of their investment. "Such nominees continued to be the directors of Religare Finvest for four years and five years, respectively, during which the promoters were neither on the Board of Religare nor responsible for its management," states the release.