This is the second part of The Wire’s investigation into the web of financial transactions involving Dreamline Manpower Solutions and the Essel Group.
Dreamline is being probed by the Serious Fraud Investigations Office for suspicious cash deposits in the aftermath of demonetisation. You can read the first part here.
1) The Serious Fraud Investigation Office (SFIO) is currently probing a a company called Nityank Infrapower (formerly Dreamline Manpower), for deposits of over Rs 3,000 crore made just after demonetisation (November – December 2016).
2) The Wire’s examination of publicly available documents show Nityank and a group of shell firms carried out financial transactions that involved a few firms associated with the Essel Group of Subhash Chandra between 2015 and 2017.
3) Nityank also went onto a play a crucial role in a large business deal between the Videocon and Essel groups in November 2016.
4) Essel maintains that Nityank is an independent firm, while Videocon alleges otherwise. The Wire’s reportage indicates that Nityank is perhaps more involved with Essel than it may admit.
5) The SFIO’s investigation has not concluded nor has any interim action been taken in the year that has elapsed.
Hyderabad/New Delhi: After transferring money to Churu Enterprises in FY 2015-16 through Lemonade Capital, Dreamline Manpower Solutions made investments that appear to have been part of a larger business transaction between the Videocon Group and Essel Group.
In FY 2016-17, Dreamline subscribed to the non-convertible debentures of a firm called Hindustan Oil Ventures Private Limited (HOVP) to the tune of Rs 1,626 crore. In the same year, the company got Rs 1,492 crore from a ‘body corporate’, money that may have been used to finance the purchase of the NCDs.
According to corporate filings, HOVP is mostly owned by the Dhoot family, the wealthy group behind the Videocon empire, with Saurabh P. Dhoot having a 49.90 % stake in the company.
The other major shareholders, as on March 31, 2015, include Force Appliances Private Limited (12%), Videocon Realty and Infrastructure Limited (19%) and Shree Dhoot Trading and Agencies limited (19%).
HOVL is an investment company and didn’t have any business at the time. According to corporate documents, what the Dhoot family therefore appears to have done is create a hypothecation deed by pledging the shares of Videocon D2H, held by some of Videocon’s group companies, to raise money for HOVL.
On December 30, 2016, HOVP entered a hypothecation deed in favour of Catalyst Trusteeship Limited. Corporate guarantees were given by Synergy Appliances Private Limited, Greenfield Appliances Private Limited, Solitaire Appliances Private Limited, Domebell Electronics India Private Limited, Platinum Appliances Indian Private Limited.
Along with this, personal guarantees were also given by by Venugopal N. Dhoot and Anirudh Venugopal Dhoot.
All these companies had a substantial stake in Videocon D2H, the erstwhile NASDAQ-listed company, which later merged with Dish TV, a Zee group company, in the fateful demonetisation month of November 2016.
HOVL’s board of directors met on December 28, 2016 and decided to issue non-convertible debentures (NCDs) worth Rs 1,626 crore, in two series with a tenure of 24 months.
In a nutshell, by pledging Videoon D2H shares to promoters of Dish TV (owned by Essel) through Dreamline/Nityank, the Dhoot family got Rs 1,626 crore. So, Dreamline’s second investment indirectly benefited the Essel Group .
Why did HOVL and Videocon do this though? In court documents, Videocon, through its group companies, have alleged that Nityank made an “advance payment” to Dhoot-owned firms on behalf of Essel as part of an arrangement whereby the Dhoots would sell their shares in Videocon D2H at a pre-determined price of Rs 106 per share to Essel.
According to a report in The Economic Times, this payment “was made by subscribing to debentures of a company nominated by the Dhoots”. The share purchase transaction that was eventually agreed to would ensure that the “Dhoots would own less than 20% stake in the merged D2H-Dish TV combine”.
Videocon’s position, expressed through companies like Domebell in legal documents, is that D2H shares were placed in Nityank’s custody so that they could be usurped by Essel if the merger were to fail.
The legal battle between Videocon and Essel started when a financial creditor took Domebell Electronics to the National Company Law Tribunal in mid 2018 for bankruptcy proceedings.
Nityank approached the NCLT and filed an intervention application which alleged that Domebell planned on pledging some Videocon D2H shares to a third-party. And that these shares that were pledged actually belonged to Nityank.
“The Applicant [Nityank] has learnt that the ‘M/s. Dome-Bell Electronics India Private Limited’- had made claim before the ‘Dish TV’ for allotment of equity shares in exchange for identified shareholding. The apprehension is that on receipt of the shares, ‘M/s. Dome-Bell Electronics India Private Limited’- (‘Corporate Debtor’) may alienate shares or deal with those shares to defeat the recovery. In the light of the aforementioned background, the application was moved so that the applicant be made an intervener, or in the alternate, prayer was made that the Debtor Company be restrained not to pledge 3,40,00,000 shares in ‘Videocon D2H’ in favour of the ‘ECL Finance Ltd,” Nityank’s plea before the NCLT notes.
In response, Domebell and other Videocon group companies approached the Delhi high court in August 2018, alleging that Nityank was actually an Essel Group company and that it had unlawfully invoked a pledge on Videocon D2G shares that were placed as security with it in the event a merger with Dish TV were to fall through.
It sought an injunction from the court restraining the allotment of shares to Nityank in the merged Dish TV entity. The court hearings are still continuing.
In conclusion, at the end of this winding transaction, Dreamline/Nityank had HOVL debentures worth Rs 1626 crore.
According to bank documents, it appears that Dreamline used these HOVL bonds to help raise money for a few Essel group companies.
Shortly after the NCDs were issued by HOVL, a tri-party agreement was formed. By December 28, 2016, Dreamline had got the debentures.
According to corporate documents reviewed by The Wire, an e-stamping certificate was issued in the name of Dreamline on December 28. They had paid the stamp duty for a ‘deed of hypothecation’ dated January 6, 2017, executed by Dreamline and in favour of Yes Bank Limited.
On December 31, loan agreements were signed between three Essel group companies and Yes Bank.
Pan India Network Infravest Private Limited was sanctioned a Rs 450 crore loan. This company is a part of Essel group, which hold licence for ‘Playwin’ online gaming.
Another group company RPW Projects Private Limited (RPW) was sanctioned Rs 500 crore. This company, which is an EPC contractor, was promoted by Essel Infraprojects Limited, the flagship company of the group.
Mumbai WTR Private Limited, a EPC contractor of Essel group, got Rs 750 crore from the bank. As the loan amount exceeded the total value of the NCDs pledged, the bank got additional security from Pan India Infraprojects Private limited, Pan India Utilities Distribution company, Pan India Network Infravest limited, Essel Infraprojects Limited – all part of the Essel Group.
In response to questions raised by The Wire on this specific series of transactions – and why a company accused of suspicious demonetisation deposits (Dreamline) would provide HOVL debentures as security for loans taken out by Essel Group firms – a company spokesperson stated that the “referred financing transactions of Essel Group Companies have been undertaken with due approvals and compliance of applicable laws and regulations”.
Picture abhi baaki hai…
While MCA officials appear to have ended their calculations here, a deeper examination of the financial trail shows there is more to the picture.
In addition to Rs 1,626 crore NCDs, the HOVL board had decided to raise another round of NCDs worth of Rs 2,250 crore. If one goes by the logic of earlier set of transactions, it is a possibility that the Dhoot family decided to offload the entire stake they hold in the Dish TV-Videocon D2H merged entity.
Hindustan Oil Ventures Limited in its board meeting held on January 5, 2018 decided to issue NCDs to raise Rs 2,250 crore. It had issued 12,300 NCDs as Series 1 Debentures to Balmukh Godljewel & Multitrading Pvt Ltd on February 6, 2018 and raised Rs 1,230 crore.
On February 14, 2018, the company had issued another round of 3136 NCDs, as Series 2 Debentures, to the same company and raised Rs 313.60 crore. Till now the company had raised Rs 1,543 crore and is yet to issue remaining debentures to reach Rs 2250 crore target.
Who is Balmukh?
Balmukh Godljewel & Multitrading Pvt Ltd (BGML)was incorporated on June 16, 2016.
The company’s first directors were Amol Deshmukh and Sachin Balsaraf. Amol Deshmukh, who is a director in a couple of companies linked to the Essel group, was replaced with Ashish Ghanshyam within months.
Ghanshyam and Balsaraf are people who have been directors in a number of companies involved in the set of transactions reported throughout this article: Ayati Multitrading, Lemonade Capital and Hadara Multitrading.
As of January 2019, BGML has not done any business, as per documents filed with the corporate affairs ministry.
The company, which had Rs 80,000 cash in hand, in its board meeting held on January 30, 2018, decided to make investments for an amount not exceeding Rs 2,000 crore outstanding at any point of time. As nearly a year has passed since that meeting, it is still unclear if the company managed to successfully raise the money and subscribe to the NCDs.
On Dreamline Manpower’s books, a little over Rs 1,500 crore is still lying idle. In August 2017, the company issued optionally convertible debentures to four interlinked firms and raised Rs 1,562 crore: Derrpan Multitrading (Rs 200 crore),Trident Destiny (Rs 420 crore), Adit Infrapower (Rs 348 crore) and Ayati Multitrading (Rs 594 crore).
After demonetisation though, Dreamline’s business activity picked up. In February 2017, the majority shareholding of the firm was transferred to yet another company called RV Trading. In the year ended March 31, 2017, it racked up revenue of Rs 95 crore but reported a net loss of Rs 19 lakh.
In October 2017, around the time that the SFIO began its investigation, the company changed its name to Nityank Infrapower Multiventures Pvt Ltd, a move that it said would better reflect the “proposed main activity” of the company.
The huge money deposits made by Dreamline Manpower Solutions was reported about first in December 2017. Money Control, a portal owned by Reliance Industries, had reported that the Serious Fraud Investigation Office (SFIO) had started investigation into 18 companies, including Dreamline Manpower, which deposited large sums of cash in their bank accounts soon after demonetisation.
“The Serious Fraud Investigation Office (SFIO) has begun a probe against 18 companies, along with the Registrar of Companies,” a senior official of Ministry of Corporate Affairs told the publication.
Later, the central government sent a notice, mentioning the specific sum of money involved, to all state police departments to alert the public to locate those companies and also warned the public not to fall prey to the claims of these companies. MCA officials then calculated the amounts involved in the financial transactions and the case was endorsed to the SFIO.
One year has passed, but the SFIO is yet to conclude its investigation or take interim action against these shell firms.
The Wire’s in-depth examination of this series of events, however, raises further questions that require answers.
The Essel Group maintains that Nityank is an independent firm and is unaware of its transactions with Lemonade Capital.
How then did a no-name company like Nityank find itself playing a pivotal role in a transaction between the Videocon and Essel Groups, two large and well-known corporate houses? And why did it provide security for loans taken out by three Essel Group firms?
And, finally, if Nityank is being probed for the deposits it made during demonetisation, how much scrutiny should be placed on the transactions it helped carry out in 2015 to 2017? This is a question only the SFIO can answer.