ED probes banks in Cox fraud case1 min read . Updated: 16 Oct 2020, 06:29 AM IST
- The investigating agency plans to question several bank officials directly involved in the transactions involving Cox and Kings to check whether they followed proper procedures before lending to the company
The Enforcement Directorate (ED), which is investigating suspected fraud at Cox and Kings Ltd, may extend the probe to some of its lenders, two people aware of the development said.
According to the persons cited above, the investigating agency plans to question several bank officials directly involved in the transactions involving Cox and Kings to check whether they followed proper procedures before lending to the company.
Founded in 1758, Cox and Kings is one of the world’s oldest travel firms. Presently headquartered in India and the UK, it was acquired by former Tata group executive Ajit Kerkar in 1981, and had been under the Kerkar family’s control till October last year when it was referred to bankruptcy courts by its lenders. Ajit Kerkar’s son Ajay Kerkar, widely known as Peter Kerkar, was its global CEO and managing director till last year.
“The precarious financial state of Cox and Kings was well known and, therefore, it is pertinent to ask whether lenders were aware of the same in the first place, and under what circumstances the loans were given and whether enough collateral was taken," one of the two people cited above said on condition of anonymity.
According to the second person, there were several instances of suspected irregularities. “In October 2019, a domestic non-banking financial company had written to the Securities and Exchange Board of India raising questions about accounting practices of Cox and Kings, just before it was referred to the National Company Law Tribunal for bankruptcy proceedings," the second person said on condition of anonymity.
“ED will soon record statements of lenders who lent to Cox and Kings. The allegation against the travel company is that it falsified bank statements to give an incorrect picture of its financials. The recording of the statement is to ascertain whether banks were lax in due diligence while extending credit and if they were complicit or a victim of the fraud," the second person cited above said.
During the forensic audit period from 2015-19, Cox and Kings reported nearly ₹2,500 crore collections from 15 customers, but the money was not traced to the bank accounts.
“Did the banks check and verify these payments is another aspect ED is looking at," the official added.