Peter Kerkar In A Deeper Soup As Defence Strategy Fails

Cox and Kings Promoter Peter Kerkar, already under investigation for major fraud, slipped deeper into trouble when the Economic Offences Wing (EOW) filed a report with the Magistrate court terming the FIRs filed by him against his erstwhile professional associates – ranging from his employees & senior management to his bankers and their representatives – as ‘false’.  According to the report filed, the EOW has concluded that “the investigation reveals that allegations levied in present MECR No. 4/20 by Mr. Ajay Ajit Peter Kerkar are false and frivolous, set out with a prejudiced set up of mind with an intention to safeguard himself from the onus of criminality arising out of 10 cases registered against him.”

In March 2020, Kerkar filed two MECRs with the Nagpada Police Station in Mumbai stating his office as being covered under its juridisction shown his office in the jurisdiction; on the basis of which he sought the magistrate’s nod to have then investigate the case. His accusations cast a broad net around everyone who had worked with him – ranging from lending banks and their employees to the Ares SSG fund, from who he had raised money, and its partner  and even some of his own employees. In essence his strategy was to cast aspersions on all and sundry around him accusing them of colluding to defraud the company while hiding the true state of affairs from the promoters. His allegations were seemingly backed by a report he had commissioned the audit firm Desai, Saksena and Associates to write basis a forensic analysis of the financial health of Cox and Kings Limited, a listed entity, and Ezeego, an acquired company.  

However, this has swiftly and spectacularly unravelled as the EOW has dug deeper into these allegations and found that this was a well-planned attempt at obfuscation of facts to blame everyone but himself. We had reported earlier how Kerkar had tried the same tricks with the UK Courts, while instead ended up dealing him a severe blow and allowed insolvency proceedings against Kerkar to commence. But the rot goes deeper as the the EOW investigation has uncovered. The agency has found that the strategy was in fact planned over time and executed cleverly by Peter Kerkar, Urshilla Kerkar and other members of his coterie. We have accessed the EOW report and the below facts emerge: 

• The choice of jurisdiction to file the FIR was based on a forged leave and license agreement, purported to have been signed in July 2019. While the forgery misrepresented the office as being at a chawl in Sewree, Kerkar all the while continued to personally run the company from the Turner Morrison building at Fort.
• However, most startlingly, the Desai Saksena and Associate forensic report, which was the basis of all of the allegations made by Mr. Kerkar, was disowned by the accounting firm itself dealing a death blow to his strategy. 
• The firms stated that they never had access to the books of account, but were rather pressured to selectively focus on a INR 83cr transaction between Ezeego and Redkite (owned by the CFO of Cox and Kings and it’s internal auditor). And all this while being stonewalled over their query regarding receivables to the tune of over INR 1000cr from what appeared to be fraudulent parties. 
• EOW discovered that 15 fraudulent customers were at the core of bogus revenues being booked to inflate the the financial performance of both Cox and Kings and Ezeego. Investigations have revealed that these companies were created in 2009 with key “friendly parties” of Kerkar as partners.  The accounts were maintained at Cox and Kings office and in a carefully planned manner their identity was obfuscated in the SAP/Oracle accounting system. This seems to have been done with a plan to help in the proposed IPO of Cox & Kings but we will have to wait and see the truth as it reveals itself in the course of the trial.

Investigation has also revealed that Peter Kerkar was fully involved in the process of negotiating with various banks for loans.  He personally met with the heads of multiple banks, where he knowingly presented false and inflated financial performance data of Cox and Kings.  He also issued personal guarantees for multiple loans which, in spite of allegations by him otherwise, are now forensically proven to have been signed by him.

As things kept getting worse, Cox and Kings was forced into bankruptcy proceedings, but even there Kerkar deliberately and repeatedly created obstacles. This led to the Resolution Professional to file in court stating non-cooperation from the promoters.  What came out in the subsequent investigation is an alarming picture comprising of issues ranging from destruction of evidence (data) and threatening employees against cooperating with the proceedings to falsification of records and pressuring employees to help create a false cases against some of their own colleagues. It ultimately reveals that the company does not have enough viable assets to successfully go through insolvency, something that is in line with our own conclusions. 

From the investigations, it appears that huge sums – in the range of INR 900cr - were siphoned from Ezeego which were the diverted into promoters’ companies to either pay off their liabilities or to pay for financing the loans Kerkar took against his shares in Cox and Kings. The EOW has also concluded, that all the transactions between Ezeego and Redkite were reflected in the financial statements of Ezeego for the Fiancial Year 2014-15, 2015-16 and 2016-17 and were filed in ROC. These financial statements were signed by Ezeego Directors (Neelu Singh and Arup Sen) and reported to Peter Kerkar and Urrshila Kerkar who were key shareholders in Ezeego.

Peter Kerkar in his role as the Global CEO oversaw the operations of all group companies, in India and abroad, and it is a matter of fact that all key financial statements would have been finalized under his supervision. Based on statements of key figures -  Anil Khandelwal, Sucheta Rane, Rashmi Jain, Govind Dhawan, Neelu Singh and Dilip Bhandari – along with forensic reports it became clear that huge amounts were diverted to related and interconnected entities of promoters of Cox and Kings. It seems that Kerkar ingeniously carved out a strategy to focus only amounts transferred to Redkite - which while done by his approval, were projected as losses to Ezeego in pursuit of this strategy. 

It appears that Kerkar went to great lengths to weave a false story painting him as the victim – instead of as the perpetrator – of the malicious financial activity at Cox and Kings. The impact of this is nowhere as stark as in the plight of Sagar Deshpande – who handled the financial and banking transactions of Kerkar - who committed suicide when the investigation commenced in this matter. The investigation report highlights this as a key point. This report has also brought to light the practice of ‘forum shopping’ being indulged in by parties in such cases; and it remains to be seen if he is prosecuted by the state for such false evidence and statements given to the Sewree court.

The order of the Special Court, Sessions, which rejected the bail of Peter Kerkar had incidentally, pointed out that these FIRs were filed by him to save himself once things got out of control.  All eyes are now on whether and how the money siphoned offshore by Peter Kerkar is recovered and repatriated to India and whether Urshilla Kerkar and their other associates who planned this fraud are also brought into the ambit of investigation and prosecution. However, as is apparent from the unfolding events as well as from our investigation, this ingenuous defence strategy of blaming everyone other than oneself, even with short term benefits, is clearly destined to fail in the long term.