Cox & Kings Ltd, a leading travel agency, has cheated Banks especially the Yes Bank by diverting funds to Alok Industries and into the accounts of its Founder Rana Kapoor.
Now all of a sudden Axis Bank, Kotak Mahinda and IndusInd Banks have claimed fraud of Rs.1030 crore, Rs.174.30 crore and Rs.249 crore by the Cox & Kings Ltd. Mumbai Police Economic Offences Wing has initiated investigation in the cases of fraud by Cox & Kings.
Actually, in the year 1758, it started as a Travel Company to facilitate officers to travel from England to India. Now it has offices in 22 countries including the US, UK, Canada, Netherlands etc. It has started as Eastern Carrying Company in India on June 7, 1939, in Mumbai. Later converted to Cox & Kings Travel Ltd on February 23, 1950. The travel arranging company went for a big public issue in December 2009 for USD 160 million and succeeded to raise capital. From then it was viewed as a big provider of Flight tickets and hotel rooms booking in entire World with its own offices in 22 countries.
The promoters and directors of Cox & Kings are Ajay Ajit Peter Kerkar, his wife Urshila Kerkar and Anil Khandelwal. For big private companies generally, private banks offer a green leaf by providing huge loans. Seeing the financial position it selected first Yes Bank lead by founder-director Rana Kapoor, as a big partner in banking facilities. Without noticing the promoters share of just 12.20% only Yes bank offered huge limits of Rs.2267 crore.
Cox & Kings started in 2009 as a subsidiary Holiday Brake Education Ltd in London to provide education facilities in London. The travel agency also started in 2009 Malvern travel in London with a 49% stake in the company. That company in London started in the 2000 year three subsidiary companies 1. Super Brake Mini Holidays Ltd, 2. Late Rooms Ltd and 3. Malvern Travel Technology.
Somewhere in 2004 Cox & Kings started fully owned subsidiary Prometheon Enterprise Ltd, UK. After seeing a roaring business Axis Bank sanctioned a loan of Rs.1030 crore for five years, Kotak Mahindra Bank Rs.170 crore and finally IndusInd bank gave Rs.249.50 crore.
The leading director Anil Khandelwal of Cox & Kings has his brother Sunil Khandelwal as the director with 20% share in Alok Industries found a suitable partner to divert the huge funds given by banks. A loan of Rs.589 crore given to Alok Industries Ltd by Cox & Kings in somewhere in 2015.
In 2017, Alok Industries became NPA for Rs.29,500 crore by a consortium of bank-led by SBI which has filed a case in National Court of Law Tribunal ( NCLT) with permission from RBI for a resolution to sell the company to recover the huge dues. NCLT called for Resolution of Alok Industries. The highest bidder was Joint venture of JM Financial & Reliance Industries Ltd for Rs.5050 crore only. As no bidder coming forward more than that amount, the case was settled and banks got Rs.5050 crore and filed a case against Alok Industries.
Cox & Kings went bankrupt in 2019. The Yes bank has removed Rana Kapoor as MD and sought Forensic audit from Price Waterhouse Cooper against Cox & Kings.
Findings of Forensic Audit
Chilling and heart braking findings were there in Forensic Audit submitted in January 2020. They verified the transaction from the last five years fact of which are as follows:
- Total loan given by Cox & Kings to Alok Industries was Rs.1100 crore. But not shown as Related Party dealings in both balance as Khandelwal brothers were directors in each company.
- In 2014 to 2019 till liquidation sales were overstated by Rs.5278 crore from 147 customers (travel brokers) who don’t have GST also.
- The company has shown a sale of Rs.3908 crore to 15 customers who were non-existent from 2016 to 2019. No travel agency or brokers were working in those addresses. But to dismay, the company showed Rs.2548 crore collections from these 15 customers, but no credits in the bank accounts. Probably employees were used for this operation. CBI arrested 16 employees in this regard.
It seems sales were jacked up only to get more loans based on sales growth as a factor.
- For FY 2018-19 cash on hand and Bank was shown as Rs.723 crore. If it were true why loans instalment was not paid with those Rs.723 crores?
- In the balance sheet shown only loans of Rs.2000.50 crore whereas all loans were Rs.3600 crore.
- Credit card dues of Rs.750 crore not shown in the balance sheet. Many people couldn’t understand this. May be totally committed deliberately from the balance sheet.
- In October 2018, the travel agency declared and sold the education tour business in Europe for USD 467 million (Rs.4387 crore at that time) to reduce the bank loans. But funds were either siphoned off or diverted elsewhere.
- Prometheon Enterprises Ltd went bankrupt for £157 million (Rs.1460 crore) in 2018.
- Cox & Kings gave Rs.589 crore to 11 related parties (promoters and executives) without any agreement.
- Malvern and its three subsidiaries also found bankrupt in 2018.
Blunders in Sanction of Loans
So people perception of Private banks takes all cares while giving huge loans was proved wrong by this classic cases. Only private banks have financed and went directionless. How London subsidiaries were financed from India? Is a big question.
Banks have financed them blindly in India based on receipt of the increase in sales in a year outside India, in 22 countries. They should have asked to go for a consortium of banks for above Rs.500 crore loan as per RBI guidelines.
First, the only Yes bank has filed a case of fraud followed by Axis Bank and Kotak Mahindra. It is not yet known whether any other bank has financed them without informing the first lender Yes Bank. Already CBI investigation is going on the Yes Bank for taking the IDBI route for sanctioning the loans to more than 20 companies including the Founder Director of Yes Bank Rana Kapoor.
However, the million-dollar question is what will happen to the Rs.1100 crore loan sanctioned to the Alok Industries by Cox & Kings. Has it gone down the drain? It seems a big chain of Fraud was hatched for years and executed. Let us wait and watch for more thunders in this case.