Fraud case: EOW summons two executives from top finance company

While Edelweiss denied the allegations, the complainant alleged that a thorough probe into restructuring deal will reveal a major bank scam

The dispute between a Juhu businessman and the financial firm Edelweiss has now reached Mumbai police headquarters. Businessman Hitesh Chhatwal has approached Police Commissioner Sanjay Barve with a complaint that Edelweiss Asset Reconstruction Company has committed a fraud with him and his companies.

Edelweiss has denied the allegations, but two executives of the company — Amit Agarwal and Rajkumar Bansal — have been summoned by the Economic Offences Wing (EOW) for a further inquiry in the case.

Speaking to mid-day, Chhatwal claimed that in December 2018, he had taken up the Edelweiss case with the EOW. However, things were not moving and a section of officers felt that there was no merit in the case. They were even planning to close the case. "Under the Right to Information Act (RTI), I got my hands on the papers that clearly show that the police wanted to close the case," the Juhu businessman stated.

Aggrieved by the police not registering the FIR and trying to close the case, Chhatwal finally decided to approach Barve.

"Mr Barve patiently heard the case and instructed EOW officials to investigate it. Accordingly, the two executives from Edelweiss were called for an inquiry by EOW," the businessman said.

According to the complaint made by Chhatwal with the EOW, Edelweiss ARC had acquired the financial assets (loan liability) of Perfect Engineering from the State Bank of India (SBI).

However, according to Chhatwal, Edelweiss had projected the value of the engineering firm as being much higher than its actual cost.

According to Chhatwal, Edelweiss had taken over a Rs 287 crore loan of Perfect Engineering, an auto parts manufacturing company, which had been restructured at a value of Rs 192 crore. The restructuring happens owing to certain events that may lead to devaluation. Chhatwal said, "We made an investment in the company in 2014-15 based on the representation by Edelweiss executives. We invested Rs 54 crore (which included loan and equity). But, later, we realised [after the death of the engineering company's promoter] that the total asset value of the firm was just R78 crore, of which Rs 34 crore were statutory dues. When we studied the case and investigated it further, we saw that Edelweiss had hidden these facts from us. We felt cheated and accordingly approached the EOW," Chhatwal added.

Edelweiss has refuted all allegations of wrongdoing. Pic/Shadab Khan

In fact, Chhatwal claimed that a detailed investigation and deep-dive by the police would lead to a bigger scam where public sector banks are being cheated and are victims of this modus operandi.

When contacted, Barve refused to comment on the issue. While Bansal did not respond to calls, Agarwal answered the call and told us to get in touch with the corporate communication wing of Edelweiss (see box 'Edelweiss says').

ExpertSpeak

An expert in the financial sector, on condition of anonymity, claimed that he cannot comment on this particular case. "But, many times equity investors and ARCs are at loggerheads when it comes to closing deals. While financial institutes are looking to raise funds, the equity investor resists it as it leads to dilution of stake, which results in such disputes," the expert added.

Edelweiss says

A spokesperson for Edelweiss said, "In March 2014, Edelweiss ARC acquired a debt of Perfect Engineering, an auto component manufacturing company, from SBI, with the intent to revive and restructure the company to keep it going and retain jobs. Unfortunately, the prolonged downturn in the auto industry coupled with the demise of the promoter in October 2018, led to an erosion in the value of the company. Edelweiss is keen on finding a resolution to save the asset through capital infusion from the remaining promoters/equity investors. Mr Hitesh Chhatwal, has been an equity investor in Perfect Group from 2014-15 and was brought in by the promoter [now deceased] of the company."

The spokesperson further mentioned that the allegations made by the investor are baseless and without merit and are detrimental to the resolution of the asset.

Catch up on all the latest Mumbai news, crime news, current affairs, and also a complete guide on Mumbai from food to things to do and events across the city here. Also download the new mid-day Android and iOS apps to get latest updates

"Exciting news! Mid-day is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest news!" Click here!