A legal injunction was placed on the publication of The Dirty Dozen by N. Sundaresha Subramanian, published by Pan Macmillan India, because of a defamation case filed by Electrosteel Castings Limited. This injunction was lifted by the Calcutta Alipore Civil Court on January 30, 2025, with the court saying the petitioner is not “entitled to get the injunction as prayed for”. The following excerpt is taken from Chapter 14 of the book, ‘The Bhushan Twins’, for which the defamation case was filed.
In his petition filed before CLB under Section 396 (suppression of facts) and 397 (mismanagement) of the Companies Act, Brij Bhushan had alleged that his son Sanjay removed him from the post of chairman and director of BPSL [Bhushan Power & Steel Limited] in the annual general meeting of the company on 17 June 2005. Brij Bhushan’s lawyers argued that Sanjay had removed his father from BPSL in a fraudulent manner, violating the provisions of company law. He also removed Neeraj, his younger brother, from the post of director from BPSL, ‘illegally and unlawfully’ violating the family agreement, they submitted to the CLB.
They further alleged that Sanjay had seized documents of nineteen investment companies belonging to the Bhushan group. As per the family agreement of June 2003, these companies were to come under the father’s control.
Brij Bhushan also asserted that BPSL and Sanjay had continued to unlawfully retain essential statutory records and documents. Moreover, they controlled the companies and wouldn’t give them to the petitioners, despite many requests. Some shares, too, were transferred to new dummy companies owned by BPSL.
The dispute had also made both companies prisoners of debt as, during the intervening years, equity capital could not be raised from the market and they borrowed extensively to keep their ambitious capex plans going. Although these disputes between father, son and brother were eventually settled by agreeing to divide the $6-billion empire equally among family members and cross-holdings disentangled by 2011, the multiple investment companies and their dealings landed both families in trouble. But before that, a big blow came in the form of coal-block deallocation.
The UPA government had opened up underexplored coal mines across the country for the private sector and had allocated them to different industry groups. Both the Bhushan companies had won coal blocks in Odisha and had mounted ambitious expansion plans to set up integrated steel plants there. In a draft letter of offer in 2012, Bhushan Steel proposed to raise about `425 crore through a rights issue. It made the following declaration about large related party transactions:
We have entered into certain transactions with related parties, including our Promoters and associates and may continue to do so in future. These transactions or any future transactions with our related parties could potentially involve conflicts of interest. For instance, in fiscal 2011, we entered into related party transaction with Bhushan Energy Limited aggregating `40,752.46 lacs towards purchase of goods and services and `2,166.57 lacs towards sale of goods and services, respectively. Similarly, we also entered into related party transactions aggregating `5,217.80 lacs and `1,853.04 lacs with Arshiya International Limited and Bhushan Aviation Limited, respectively, in fiscal 2011.
We cannot assure you that we could not have achieved more favourable terms had such transactions been entered into with unrelated parties. There can be no assurance that such transactions, individually or in the aggregate, will not have an adverse effect on our business, prospects, financial condition and results of operations, including because of potential conflicts of interest or otherwise. In addition, our business and growth prospects may decline if we cannot benefit from our relationships with our Promoters and associates in the future.
Related party transactions are usually red flags, as these could be abusive for minority shareholders considering promoters tend to enrich themselves at the expense of the other shareholders.
A large uncertainty was encountered when a draft report by the CAG in March 2012 accused the government of inefficient allocation of coal blocks between 2004 and 2009, leading to windfall gains of `10.7 lakh crore to the allottees. In September 2012, an inter-ministerial group recommended cancellation of the allocation of New Patrapara block given to Bhushan Steel in 2006 on the grounds that it had not commenced production from it.
N. Sundaresha Subramanian
The Dirty Dozen: India’s Twelve Biggest Corporate Defaulters
Pan Macmillan India, 2025
Bhushan Steel petitioned the Delhi high court, challenging the move by saying that its end-use project was almost ready and a confirmation to this effect had been offered by the steel ministry. Even as the judicial process dragged on, in September 2014, a month after Neeraj was arrested by the CBI in the Syndicate Bank bribery case,10 the Supreme Court cancelled all the 194 coal-block allocations, plunging numerous allottees and their projects into crisis. Later, more issues hit the Singal family during 2014 and 2016.
In 2014, during a routine assessment, an assessing officer of the income tax department observed that the BSL Group was suppressing taxable profits on a large scale. The unaccounted income thus generated was being introduced into the books of family members and promoters of the BSL Group. The tax-exempt, bogus long-term capital gains of hundreds of crores by pre-arranged trading in shares of some nondescript listed companies was evidenced. Such fraudulent capital gains were an accommodation entry obtained with the help of some entry operator.
In a coordinated search-and-seizure operation conducted on 13 June 2014, the income tax department gathered several incriminating documents from the premises of the BSL Group and Raj Kumar Kedia, a known accommodation entry operator.11 Such an entry represents a financial transaction between two parties, wherein one party records the transaction in its books to accommodate another. These transactions occur mostly in lieu of cash of equal amount and commission charged over and above at a certain fixed percentage for providing the entry.
Apart from statements from the staff of Bhushan Group, the income tax department also seized a pen drive containing details of the long-term capital gains (LTCG) book of Singal family members – Brij Bhushan, Neeraj Singal and their respective spouses Uma and Ritu. These pertained to several penny stock* companies, such as Rander Corporation, Ankuran Commercial and so on.
The assessing officer submitted that of the eighteen companies that SEBI was probing for misallotment of shares to launder money and avoid taxes, the Singal family members and entities had conducted transactions with nine – Radford Global, Mishka Finance and Trading, Parag Shilpa Investments, Dhenu Buildcon Infra, First Financial Services, Pine Animation, Rander Corporation, Action Financial and Prraneta Industries.
Separately, a SEBI investigation found that First Financial Services Ltd (FFSL), a Kolkata-based listed firm, had made preferential allotments of shares to several entities in the Singal family and investment companies connected to them. In what was came to be known as the LTCG scam, SEBI took up investigation after receiving information from the income tax department, showing that the share prices had been manipulated artificially to generate long-term capital gains for the preferential allottees.
Show Cause Notices (SCNs) were issued to the Singals and their respective spouses, and companies such as Marsh Steel Trading and Vision Steel. In an interim order, some of these entities were barred from participating in markets until further orders.
In the final order in April 2018,13 SEBI said that there was not enough evidence to proceed against these entities in the first financial matter. As per the Income Tax Appellate Tribunal, Brij Bhushan Singal, Neeraj Singal and Uma Singal were given preference in allotment. On 19 September 2011, FFSL transferred `1 crore and `50 lakh to Marsh Steel Trading Ltd and Vision Steel Ltd respectively. Aarti Singal, a relative of the Singal group, was a director in both companies. As per the show cause notice, she was also a promoter in Bhushan Steel Ltd until 30 September 2011. The transfer of `1.50 crore from the allotment proceeds to Marsh Steel Trading Ltd and Vision Steel Ltd indirectly benefitted the Singal group of allottees.
Further, the two companies stated that the `100 lakh received from FFSL on 16 September 2011 and 14 December 2011 were capital contributions. They allotted 40,000 equity shares to FFSL on 31 December 2011 and filed the necessary documents with the Registrar of Companies. Similarly, Vision Steel Ltd received `50 lakh from FFSL on 16 September 2011 which was also a capital contribution. They allotted 20,000 equity shares to FFSL on 13 December 2011 and made the required filings. It was claimed that the funds received were invested in BPSL.
N. Sundaresha Subramanian.
Brij Bhushan, Neeraj and Uma Singal also brought to light the decade-long family dispute, settled in November 2011, because of which the funds received from FFSL were not transferred to the BPSL Group. Since the settlement terms were fully implemented only by February 2012, the three clarified that they had no role in the affairs of Marsh Steel Trading and Vision Steel, where Aarti Singal (wife of Sanjay Singal) served as Director. In the case of the transaction between Neeraj Singal and Pine Animation Ltd, `80 lakh were paid for preference shares on 12 December 2012, and `40 lakh on 15 March 2013. Furthermore, the shares of FFSL were purchased based on information and feedback received from professionals and individuals with knowledge of the securities market. Based on their explanations and all circumstantial evidence, it was determined that no further action should be taken against Brij Bhushan Singal, Uma Singal, Neeraj Singal, Marsh Steel and Vision Steel Ltd.
However, some analysts were not convinced by the order and felt that the group was let go easily. These concerns were not without reason, given the detailed accounts put out by the income tax department. But SFIO took over from where SEBI and the income tax department left off. Neeraj Singal was arrested for a second time four years later in August 2018.
As per the release in the Press Information Bureau (PIB), Neeraj Singhal, former Promoter and Managing Director of Bhushan Steel Ltd, was arrested by the SFIO after being found ‘guilty of indulging in serious corporate fraud punishable under Section 447 of the Companies Act, 2013’.14 The arrest was made during the investigation into the company’s affairs, prompted by complaints received from various sources. It was found that the erstwhile promoters engaged in complex fraudulent activities to divert and siphon off funds, causing significant losses to banks and investors. Throughout the investigation, the former promoters failed to cooperate and concealed crucial information and ‘material facts’.
Separately, the SFIO also grilled the elder brother Sanjay Singal.
