Companies
Tibrewala-linked hawala operator’s plan to buy a broking firm dashed
Summary
- In March, the Enforcement Directorate labelled Tibrewala a ‘hawala operator’, saying he had used several entities to launder illicit money made from an illegal betting app to buy stocks in India
- Suraj Chokhani, whom the ED refers to as Tibrewala’s Indian counterpart, was set to buy a brokerage
BENGALURU/MUMBAI: The planned acquisition of a brokerage firm by the Indian counterpart of Hari Shankar Tibrewala, allegedly the mastermind behind the Mahadev Online betting scandal, has collapsed.
The proposed buyer acknowledged for the first time that the ongoing investigation by the Enforcement Directorate into the scandal has rendered his firm unfit to run a broking business.
Brij Rattan Bagri and his family, the promoters of brokerage BLB Ltd, had in January agreed to sell their 36.84% stake in the firm to Dream Achiever Consultancy Services Pvt. Ltd. Dream Achiever, or DACSP, is owned by Suraj Chokhani, a Kolkata-based resident whom the ED refers to as Tibrewala’s Indian counterpart.
As part of the deal, an open offer was triggered under which Dream Achiever was to buy an additional 26% shares in BLB by 15 June.
But in March, Bagri’s plan to exit the company, founded by his father Babu Lal Bagri in 1965, appeared dashed as a result of the ED's actions, including freezing of Dream Achiever's assets and bank accounts.
“The order also prohibits the transfer of these assets without prior permission from the office of the Joint Director, Enforcement Directorate, Raipur Zonal Office," Fast Track Finsec Pvt. Ltd, the merchant bankers to the BLB open offer, had said in an emailed statement.
That communication also exposed 13 entities whose assets the ED had seized as part of its investigation.
Earlier this week, on 10 June, Sarbani Bhagat, a director at Dream Achiever Consultancy, wrote to Bagri that legal impediments had prevented the company from obtaining approvals from the stock exchanges and the Securities and Exchange Board of India for the acquisition.
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“[D]ue to intervening circumstances, including the orders passed by the Enforcement Directorate (ED) under Section 17(1-A) of the Prevention of Money Laundering Act, 2002, freezing DACSP's properties, investments, balances, equity shares, securities, F2O, and demat accounts, and the prohibition on the transfer of any assets without prior permission from the ED, DACSP has been incapacitated from conducting the transaction as envisaged," Bhagat wrote in his letter to Bagri.
These circumstances, Bhagat added, prevented DACSP from fulfilling its open offer obligations within the mandatory timeline of 150 days, which is to lapse on 15 June.
“We regretfully inform you that we are constrained to terminate the Agreement and will be applying to Sebi to seek withdrawal of the open offer," he wrote.
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On 8 March, the ED labelled Tibrewala a ‘hawala operator,’ saying he had used several entities to launder illicit money made from the betting app into buying stocks in India.
The ED also seized the assets of 13 companies believed to be vehicles for laundering illicit money from the betting app. Chokhani owns eight of these companies, according to documents reviewed by Mint.
"The acquirer is under a regulatory cloud and has conveyed his inability to complete the transaction and is entitled to cancel the Share sale and purchase agreement. The seller has no option but to scout for another acquirer," said Chirag M. Shah, counsel - Securities Law, Arbitrator.
Shares of BLB, which traded at ₹21.75 apiece at the end of March 2023, had jumped to ₹52.55 a share by 29 February this year. BLB shares ended at ₹18.20 apiece on Tuesday.
BLB has informed the exchanges that Bagri would seek legal advice after Dream Achiever informed the company of ending the proposed decision to buy the company.
