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NEW DELHI : A preliminary investigation by an external specialist has highlighted two egregious instances of fraud at BharatPe, the merchant-focussed fintech firm hobbled in recent weeks by the cloud of controversy over its co-founder Ashneer Grover. Grover’s wife and the firm’s controller till recently, Madhuri Grover, is linked to both the fraudulent schemes.

The report by Alvarez and Marsal, a risk advisory firm, is dated 24 January and was submitted to the BharatPe board. Mint reported on 30 January that the board had arrived at a decision to terminate the services of Grover based on the preliminary report, even as it has commissioned a comprehensive report.

The allegations of financial wrongdoing are on two major grounds. One is the irregularities in recruitment and second revolves around paying non-existent vendors. Madhuri Grover had been serving as head of control at BharatPe since incorporation and headed procurement and admin departments. A Mint reporter has seen a copy of the report.

The Grovers and BharatPe have not responded to requests for comment at the time of publication.

The Panipat connection

BharatPe used to pay recruitment fees to HR consultants for employees recruited through them. The investigation has found that the company was recruiting staff but fraudulently paying a network of staffing companies that had nothing to do with the hiring and appear to be linked to each other as well as to Madhuri Grover.

A&M reviewed the invoices of fees paid to these consultants. The employees confirmed their date of joining as stated in the vendor invoice. But they denied being recruited through the stated consultants or any knowledge of them.

It at least three instances, A&M noted that Madhuri Grover had directly received the invoices from the vendors and forwarded these to the accounts team for payment.

These companies were mostly sole proprietorships and the invoices were created by Shwetank Jain, the brother of Madhuri Jain, the report says.

Besides, the firms involved had commonalities such as similar email addresses, similar physical addresses, similar formats, same bank branches, etc. And most importantly, they were all based in Panipat. The report notes that Madhuri Grover is originally from Panipat.

An examination of just two of the vendors pegged the amount paid by BharatPe for undelivered services at close to 4 crore.

No show cause, please

The report found close to 51 crore was paid to 30 vendors who appeared to be non-existent. These vendor payments were caught by the Directorate General of GST Intelligence (DGGI). And the company instead of contesting the demand for service tax, paid close to 11 crore in dues along with penalties.

These irregularities came out post a search by DGGI on 21 October 2021, just ten days before Grover got into a legal tussle with Kotak Wealth Management over not being able to secure financing to bid for the public offer of Nykaa.DGGI which investigates into tax evasions had issued summons to a company official on 1 November.

On 11 November 2021, the company sent a communication to the DGGI on this issue. The letter was signed by “Deepak Jagdishram Gupta". The Alvarez and Marsal report says Gupta was responsible for procurements at the company and is Madhuri Grover’s brother-in-law.

In this letter, Gupta said it is on the basis of DGGI investigation they have come to know that some of the vendors of their company do not exist or never operated at their principal place of business. He further requested the department to waive off the show cause notice in lieu of paying the dues and associated penalties.

The prelim investigation found that this involved overall expenditure related to the 30 vendors of 53.25 crores (under validation) The company reversed the claimed input credit of Rs9.54 crore and paid a penalty of 1.54 crores.

A&M has recommended to the board that this requires deeper investigation as to why the company was dealing with ‘non-existent vendors’.

 

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