The Ministry of Corporate Affairs (MCA) has begun an investigation into alleged financial fraud by Anil Ambani’s Reliance Capital and Reliance Home Finance, a month after auditing firm
Price Waterhouse & Co (PwC) resigned as auditor for both the companies, it has been reported.
Economic Times reported on Wednesday that the MCA will start “questioning the management and the audit committees of both the Reliance group companies”. Quoting sources, the report added that the investigators would also question the current auditor of the companies Pathak HD & Associates and PwC executives who worked on the audit assignment.
Government’s probing agency Serious Fraud Investigation Office would be spearheading the probe in the coming weeks.
In May, PwC resigned as the auditor of the two companies and stated that it suspected fraudulent transactions by the Reliance companies during the first quarter ending financial year 2018-19. Reportedly, PwC also submitted some documents to the ministry that included details about the questionable transactions.
However, both Reliance Capital and Reliance Home Finance denied PwC allegations as ‘baseless’ and ‘unjustified’ and stated that there is no question of ‘diversion’, zero loans and liquidity have been provided by any lender in the PwC audit period.
Reliance Group has been mired in several controversies for some time now. Recently, a probe commissioned by State Bank of India (SBI) had flagged transactions by three companies – Reliance Communications (RCom), Reliance Telecom and Reliance Telecom Infrastructure amounting to Rs 5,500 crore. Accounting firm BDO engaged by State Bank of India (SBI) had looked at transactions of the three companies between May 2017 and March 2018, and flagged numerous suspicious transactions during the period. For instance, ET reported one such suspicious transactions: “A little known company Netizen had received capex advances of Rs 4,000 crore in May 2017 through transactions emanating from Reliance Group companies. what raised suspicion was the size of the amount, which was later set off against liabilities.”
Reliance Group companies have a debt of over Rs 1 lakh crore with RCom accounting for Rs 49,193 crore, followed by Reliance Telecom at over Rs 24,306 crore.
RCom is currently going through bankruptcy process under Insolvency and Bankruptcy Code.
Earlier this year, Reliance Group entered a standstill agreement with 90% of its lenders who agreed to not to release the Group companies shares pledged with them till the end of September, 2019.
Anil Ambani had recently stated that the Reliance Group has made aggregate debt servicing payments of over Rs 35000 crore in the 14-month period from April 1, 2018 till May 31, 2019. These comprise principal repayments of Rs 24,800 crore and interest payments of Rs 10,600 crore.
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