Behind Bars: India Inc. Czars Who Fell To The Last Business Cycle

The post-global financial crisis growth in Indian economy and the rush of corporate expansion activity burned many. Companies. Promoters. Chief Executives. Bankers.

For the first time in India's post-liberalisation economic history, many who once led storied enterprises have gone to jail for alleged improprieties.

From Avantha Group's Gautam Thapar to the Singh brothers of Ranbaxy, Fortis and Religare fame. From Yes Bank Ltd.'s Rana Kapoor to the Wadhawans of Dewan Housing Finance Corp. and Ravi Parthasarthy of IL&FS.

Each was influential. Each connected in the corridors of power. Each built business at scale but fell afoul of rules. Each now incarcerated.

Gautam Thapar

By the time you read this, the scion of one of Delhi's well known industrial families will have already spent one day in the custody of the Enforcement Directorate and may have to spend more.

Gautam Thapar, 60, who fashioned his family's power-to-paper conglomerate into the Avantha Group, is being accused by investigating agencies of criminal breach of trust, cheating, criminal conspiracy and misappropriation of public money between 2017 and 2019. The alleged actions caused a Rs 466-crore loss to Yes Bank, according to the Enforcement Case Information Report.

Thapar's residence and offices were raided on Aug. 4 and he was subsequently arrested and remanded to one-day custody of the Enforcement Directorate.

The case against Thapar, as detailed in the CBI's first information report and remand application by the Enforcement Directorate alleges that he and private firms owned by him diverted Rs 500 crore worth bank loans made to other group entities. He is also being investigated under the Prevention of Money Laundering Act.

Thapar's troubles began when key group companies took on large debt to finance a string of business acquisitions or invest in new projects. It didn't all go to plan, especially as the economy turned. Eventually, he had to sell some flagships such as Crompton Greaves Consumer Electricals Ltd. and CG Power and Industrial Solutions Ltd. Yet, a multitude of intra-group transactions surfaced in recent years leading to current allegations. One of the group's relationships under investigation is with Yes Bank.

Rana Kapoor

Yes Bank's co-founder and chief executive Rana Kapoor is among the most high-profile bankers to have been arrested. Kapoor co-founded Yes Bank in 2003 and grew it rapidly to become one of the top five private banks but aggressive growth strategies pursued in latter years went wrong.

Kapoor was arrested on March 8, 2020, just days after Yes Bank collapsed and had to be rescued by a consortium of lenders.

He has remained in jail since then.

Earlier this year, BloombergQuint reported on the charges being levelled against Kapoor. In most of the cases filed against Kapoor, the allegations are related to kickbacks received in lieu of loans being sanctioned against the bank's policies.

For instance, the Enforcement Directorate had alleged that Kapoor and his family had enriched themselves to the tune of Rs 5,000 crore through kickbacks received from DHFL.

The CBI has booked Kapoor and his wife for allegedly receiving a residential property worth Rs 378 crore, owned by Avantha Group's Gautam Thapar, against Rs 400 crore that Thapar borrowed from Yes Bank. The loans were sanctioned without any reasonable basis, according to the FIR filed by the CBI on March 12, 2020.

Wadhawans

The Wadhawans brothers — Kapil and Dheeraj — were arrested by the CBI in April 2020. The arrest, according to a PTI report then, had come in connection with the money laundering probe against Yes Bank's Kapoor and others.

Dewan Housing Finance, promoted by the Wadhawans, had been referred for insolvency proceedings in November 2019. Until then, it was among the largest housing financiers.

Like in the case of Kapoor, a number of cases have since come up against the brothers. According to a report dated Jan. 9, 2021 in The Hindu, the CBI alleged that the duo gave kickbacks to the tune of Rs 600 crore to Kapoor in return for the bank's Rs 3,700 crore investment in the company's debt securities.

In an April 2020 order, while rejecting the bail plea of the brothers, Justice SV Kotwal of the Bombay High Court had said that an “offence under Section 409 (criminal breach of trust by public servant, or by banker, merchant or agent) of the Indian Penal Code is made out. The ingredients of this offence are clearly borne out in the report filed before the special CBI court.”

Other cases have come up since. On March 24, ANI reported that CBI has filed a criminal conspiracy case related to the finding that DHFL had opened fictitious loan accounts to avail subsidy under the Pradhan Mantri Awaas Yojana. Investigations into DHFL have revealed a large number of fake accounts and bad loans.

The Wadhawans remain in jail more than a year after the arrest.

Ravi Parthasarthy

The Infrastructure Leasing & Financial Services, or IL&FS Group, was a leader in the infrastructure boom that followed the financial crisis. The group was led by the reclusive and influential Ravi Parthasarthy. From funding and advisory to building and operating infrastructure assets, IL&FS was doing it all via a web of 347 different entities.

When in August 2018, IL&FS defaulted on dues, it rattled the Indian debt markets as the company had close to Rs 1 lakh crore in borrowings. The company was referred for insolvency and a board was appointed to unbundle the complex institution.

Parthasarthy was not among the first officials arrested in the case. His ill-health, according to reports, was the reason for this.

Instead, Hari Sankaran, who was vice chairman, and Ramesh Bawa, who headed IL&FS Financial Services Ltd., and Ramchand Karunakaran, who headed IL&FS Transportation Networks Ltd., were among those arrested under provisions of the Prevention of Money Laundering Act.

It was only earlier this year that Parthasarthy, too, was arrested. His arrest, however, came on account of a complaint filed by 63 Moons. According to a Business Standard report, 63 Moons alleged that ITNL had failed to repay dues worth Rs 200 crore.

“The kingpin and the mastermind of the Rs 1 lakh crore IL&FS scam, Ravi Parthasarathy, has been arrested by the EOW (economic offences wing) in connection with Crime No. 13 of 2020 dated 20 September 2020. The IL&FS Group, which consists of more than 350 group companies, was used as a vehicle to perpetrate fraud by the then management of IL&FS Group, which was headed by the then chairman and MD & CEO, Ravi Parthasarathy,” the Chennai police EOW said in a statement, according to the newspaper.

Singh Brothers

Malvinder and Shivinder Singh have been in jail since October 2019 in cases of alleged fraud, diversion of funds from listed companies to private firms and money laundering.

In just over one decade the brothers scripted a riches to rags story that is currently mired in several court cases and continues to confound.

In 2008, the Singhs sold their family's pharmaceutical business to Japan's Daiichi Sankyo and invested the $2.4 billion proceeds in financial (Religare) and healthcare (Fortis) services. But the sale to Daiichi soured on regulatory issues and the Japanese acquirer won an arbitral award of Rs 3,500 crore.

The Singhs claimed they were unable to pay it as all their money was tied up in loans to their spiritual guru and other ventures gone bad. Subsequent investigations by Securities and Exchange Board of India and federal agencies such as CBI and Enforcement Directorate found several financial irregularities that indicated the Singhs were allegedly using public funds for private purposes. Stuck in this intricate web of transactions and cases is Daiichi's money and a half done sale of Fortis Hospitals to Malaysia's IHH Healthcare.

Meanwhile, in July, the Delhi Police filed another case against the Singh brothers charging them with criminal breach of trust, cheating, falsification of accounts and criminal conspiracy.

Peter Kerkar

In November 2020, the Economic Offences Wing of the Mumbai Police arrested Peter Kerkar, the promoter of well known public listed travel company Cox & Kings Ltd.

Kerkar was arrested on a complaint made by Axis Bank Ltd. alleging diversion of loan funds, as reported by Times of India. The company is facing at least five cases alleging cheating of more than Rs 2,000 crore.

The bankrupt company has also defaulted on loans made by Yes Bank. The Enforcement Directorate has alleged these loans were made flouting rules and the amounts were diverted to private companies, as reported by Hindustan Times.