Rana Kapoor, founder of the Yes Bank. File
| Photo Credit: AFP

A special court in Mumbai granted bail to Yes Bank co-founder Rana Kapoor on Friday. The Enforcement Directorate (ED), Mumbai, arrested Mr. Kapoor on March 7, 2020, for involvement in a ₹ 466.51 crore bank fraud. He was also charged with money laundering and eight other cases related to bank fraud. He secured bail in all the cases filed against him by the ED. Mr. Kapoor walked out of Taloja Central Prison at 7p.m after more than 4-years of incarceration.

Mr. Kapoor’s lawyer Rahul Agarwal said, “The case in brief is that Yes Bank Ltd was accused of misappropriation of the impugned loan amount and through Bliss Abode Private Limited (BAPL) had the sole intention of taking over the prime property at Amrita Shergill Marg (ASM) in New Delhi. Rana Kapoor had filed a bail application on the ground that the allegations in the chargesheet do not prima facie reveal his role in the case and no offence is made out against him. In the present case, Mr. Kapoor was sent to police custody on August 14, 2021, and had been in judicial custody since 21, 2021 in the present case.”

Criminal conspiracy

The court granted bail to Mr. Kapoor in the CBI’s case against him and Avantha Group promoter Gautam Thapar for alleged criminal conspiracy, criminal breach of trust, cheating and forgery to divert ₹ 466.51 crore in public money.

The other two accused in the case are already on bail and Gautam Thapar was released on bail without arrest. Rana Kapoor also stated that he was never the sole/final approving authority of the impugned loan transaction and the entire Management Credit Committee (MCC) involving other members had collectively approved the Impugned loan unanimously. Each member had a right to veto and no one objected to the sanction of the load despite an elaborate credit appraisal mechanism.  

“Some of the members of the MCC were named as witnesses by the CBI but are named as ‘accused’ in the PMLA offence by the ED and their respective statements were recorded by the ED. CBI’s main allegation in the chargesheet is that the property at ASM was purchased at an undervalued consideration is baseless and reliance was placed on various valuation reports which were either pre-demonetisation era or the valuation itself was defective,” said Mr. Agarwal.  

‘False claim’ in chargsheet

Mr. Agarwal also claims that the ED chargesheet falsely and mischievously portrays that Rana Kapoor was somehow obligated to disclose his wife’s interest in BAPL, and in the transaction with Avantha Reality Ltd (ARL), and that he failed to do so but Rana Kapoor duly disclosed to Yes Bank Ltd‘s Board of Directors that his wife was a Director of BAPL which is borne out in the chargesheet. 

“The chargesheet makes out a vague case that three loans were granted by Yes Bank Ltd to Avantha Group (AG) entities prior to and after the sale of the property to BAPL, that were not used for specified purposes. No connection was drawn by CBI between such loans and the sale transaction of the property, and none exists. Considering all this evidence, the court released him on bail,” Mr. Agarwal informed.  

Yes Bank founder Rana Kapoor. File.
| Photo Credit: PAUL NORONHA

Capital markets regulator SEBI has ordered the defreezing of bank accounts as well as share and mutual fund holdings of Rana Kapoor, former MD and CEO of Yes Bank.

Kapoor has been in jail since March 2020 in connection with the DHFL money laundering case.

The markets regulator, in July, sent a notice to Kapoor asking him to pay ₹2.22 crore in a case of misselling the private sector lender’s Additional Tier-1 (AT1) bonds and warned of arrest and attachment of assets as well as bank accounts if he fails to make the payment within 15 days.

This amount includes interest and recovery costs.

The demand notice came after Kapoor failed to pay the fine of ₹2 crore imposed on him by the Securities and Exchange Board of India (SEBI) in September 2022.

Thereafter, in September this year, the regulator attached bank as well as demat accounts along with mutual fund folios of the defaulter.

The release order came after the Securities Appellate Tribunal (SAT), through a ruling on September 12, granted an interim stay on a SEBI order in the case of misselling the private sector lender’s AT1 bonds.

Further, the appellate tribunal directed Kapoor to deposit a sum of ₹50 lakh within six weeks. In compliance with the order, he paid the amount within the timeline.

The matter has been listed for a final hearing on November 20.

In a notice issued to all banks, all mutual funds and depositories — CDSL and NSDL — on Friday, SEBI asked them to “release the bank account(s), locker (s), demat account (s), mutual fund folio (s) of the defaulter (Kapoor) attached”.

The case relates to the misselling of the bank’s AT1 bonds to retail investors by the bank’s officials. It was alleged that the bank and certain officials did not inform investors of the risk involved while selling the AT1 bonds in the secondary market. The sale of AT1 bonds started in 2016 and continued till 2019.

In its order, SEBI had stated that Kapoor was overseeing the entire operation relating to the secondary sale of AT1 bonds, taking regular updates from the team and giving them further instructions to increase the sales, thus creating pressure on the officials to ramp up the sales.

Further, the regulator said that Kapoor was responsible for acts of misrepresentation or suppression of material facts, manipulation and misselling of AT1 bonds of Yes Bank to individual investors.

Also, Kapoor pressured officials of the private wealth management team to devise a devious scheme to dump the AT1 bonds on hapless customers of Yes Bank, SEBI had said in its order.