Amtek Auto’s audit report hints at embezzlement

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Bankrupt auto component maker Amtek Auto allegedly diverted bank loans to several related parties between 2015 and 2017, sources told FE.

Bankrupt auto component maker Amtek Auto allegedly diverted bank loans to several related parties between 2015 and 2017, sources told FE. The auto component maker was among the first companies to be sent to bankruptcy courts for resolution in 2017.

According to an EY transaction audit report, for several potential related party transactions, the company was unable to produce underlying invoices or related documents. FE reviewed a copy of the document. Last month, the Ministry of Corporate Affairs (MCA) moved the Chandigarh bench of the National Company Law Tribunal (NCLT) requesting an investigation by the Serious Fraud Investigation Office (SFIO) into the company in order to recover `2,320 crore of its promoters.

For example, loans and advances of 363.98 crores, according to the EY report, were granted to 10 potential related parties between October 1, 2015 and July 24, 2017. The audit report states that no supporting documentation underlying has been made available by Amtek Auto. for these loans and advances, and no interest income has been recognized in respect thereof.

In some cases, the company’s ledger accounts indicated that loans worth 75.26 crores were potentially issued to meet principal and interest debts of related parties. Certain of the alleged related party transactions involving payables and receivables have been adjusted from the headings “exempt purchases” and “exempt sales”, respectively.

Yet there were no underlying supporting documents available to verify the movement of goods against these transactions. The total adjusted amount under “exempt purchases” and “exempt sales” amounted to 141 crore and 272.98 crore, respectively, for nine related parties. Amtek Auto was one of the companies named on the Reserve Bank of India (RBI) first list of 12 Large Non-Performing Assets (NPAs) mandated to be resolved under the Insolvency and Bankruptcy Code (IBC) . According to documents released during the resolution process, Amtek Auto owed its financial creditors `12,322 crore.

His group companies Castex Technologies and Metalyst Forgings owe lenders another 11,150 crore. In December 2021, the Supreme Court declared that Deccan Value Investors’ resolution plan for Amtek Auto must be implemented within four weeks. Emails sent to EY and Amtek Auto resolution professional Dinkar Venkatasubramanian went unanswered until press time.

EY’s transaction audit report cites several instances of unrecorded funds transfers from Amtek Auto to potential related parties. It says public domain searches of related party email IDs, addresses and directions disclosed in the financial statements have indicated additional parties that may potentially be related to Amtek Auto, referred to as AAL.

“Subsequently, a list of 127 parties potentially related to AAL was made available by AAL. The list included 33 related parties which were disclosed in AAL’s financial statements,” the report said. ‘ worth 1,206 crore made by Amtek Auto to various parties including those related to the company, it could produce invoices worth only 80.31 crore. A review of these indicated that the Invoices amounting to 30.75 crores were stamped by Amtek Auto with date and time of receipt and mode of transport and invoices amounting to 35.57 crores were unstamped.

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