Pharma C&F agents charge Torrent Pharmaceuticals & Elder Pharmaceuticals with multi-crore fraud, cheating

“Where every voice is heard” proclaims the website of Torrent Pharmaceuticals Limited, a company claiming high repute. However, Carrying and Forwarding agents based in different parts of the country allege that what to speak of hearing to their grievances and giving them their legitimate due, they have been left completely high and dry and made to run from pillar to post to seek recovery of about 45 crores from pharma major Torrent Pharmaceuticals Limited, writes CHARANJIT AHUJA

It is alleged that Torrent in connivance with Elder Pharmaceuticals Limited, a company currently into liquidation, indulged into a multicrore economic fraud whereby defrauding many operational an other creditors including 17 Clearing and Forwarding (C&F) agents of their legitimate dues.

Giving their side of story to Tehelka, the 17 C&F agents alleged that the two companies in a most systematic and organised manner, committed a multicrore financial fraud whereby Torrent Pharmaceuticals Limited acquired almost the entire business of Elder Pharmaceuticals Limited and rendered the said company as merely a shell company. It is alleged that before the said acquisition took place Torrent Pharma was aware of the admitted pending liabilities of Elder Pharma and with the intent to siphon huge sums of money, running into several hundred crores, both companies connived to defraud several operational creditors of Elder Pharma.

To carry forward the said fraud both companies executed a Business Transfer Agreement (BTA) on December 13, 2013 and allegedly in the hindsight of the said agreement the entire business of Elder was transferred to Torrent rendering Elder as barely a shell company with no assets but huge liabilities. The 17 C&F agents were initially C&F agents of Elder Pharmaceuticals and had deposited between 25 lakhs to one crore each as refundable security deposit with the said company and their respective C & F agreements were valid upto March 31, 2015.

On the date of execution of the Business Transfer Agreement with Torrent Pharmaceuticals Limited, each of said C & F agents had huge admitted money to recover from Elder Pharma which included dues towards commission, expenses interest etc. C&F agents allege that during the time of execution of BTA, they (the C&F agents) were misguided and befooled by the officials of Elder Pharma who represented that upon execution of some Novation Deed with Torrent) by Elder Pharma, which was signed by all C & F Agents and supplied back to Elder for its execution by Torrent.

However, upon conclusion of the Business Transfer and exchange of consideration between the two companies, Torrent did not sign the Novation deed with the C&F Agents and the C & F agents were made to believe that signin or not signing the Novation deed is the discretion of Torrent and nothing could be done about the same.

Torrent in its unilateral representation before the Competition Commission of India got an approval from the said Commission against the Business Transfer (Combination). The C&F agents allege that Torrent made false representations before the Competition Commission and by playing a fraud misguided Competition commission to pass an order approving the Business Transfer.

The C&F agents under the misguided belief and understanding continued to chase Elder Pharma for their pending dues and in this regard initiated arbitration proceedings and other ancillary proceedings against the Elder. Even an Order was passed by the Bombay High Court, directing Elder to furnish a bank guarantee against the dues of the C & F Agents. That during the proceedings before the Bombay High Court, Elder maintained the stance that the dues were a liability of Elder Pharma however in the arbitration proceedings, it was for the first time that Elder indicated that Torrent was liable to discharge all liabilities of C&F Agents which accrued prior to and during the execution and conclusion of the BTA. Surprisingly, despite several orders passed by Arbitral Tribunal directing Elder to supply copy of BTA to C&F Agents, the same was not supplied and on one pretext or the other Elder Pharma evaded and avoided to supply the BTA to C & F Agents.

Allegedly as planned, within few months later Elder Pharma collapsed and slipped into liquidation resulting in stalling of all legal proceedings initiated by the C&F Agents against Elder.

The C&F agents claim that until, April 2018 the C & F Agents were unaware of the explicit terms of the BTA, the Novation Deed forming Part of BTA and the Escrow agreement, which BTA and other ancillary documents were deliberately and consciously concealed by Torrent and Elder Pharma. The C & F  Agent were able to get their hands on the BTA and other documents in April 2018 and the illegal role and modus operendi of Torrent came into light. It was learnt for the first time that Torrent had acquired the business on “SLUMP SALE BASIS” and it was under a mandatory obligation to continue the C & F business with the 17 C & F agents and execute the Novation Deed which formed part of the BTA. For all purposes, including obligation to discharge liability, Torrent had stepped into the shoes of Elder Pharma and was under a mandate of law to release the legitimate pending outstanding of the 17 C & F Agents.

As alleged, the hide and seek game of Torrent was over after discovery of the BTA by the C & F Agents, who are now aggressively pursuing the matter against Torrent and as informed are in process of filing complaints before the Economic Offence Wing of Police and also complaint to Serious Fraud Investigation office. The C & F Agent allege that in a well-designed conspiracy between the top brass of both companies and with the intention of siphoning dues of Operational Creditors, the much kept secret BTA was executed, without its terms being made known to concerned creditors and in a systematic manner Elder was deliberately pushed into liquidation with the malafide intentions to deliberate a huge multi crore fraud. After acquiring the Business of Elder Pharma, Torrent not only wiped out competition for itself but made multi fold gains by not discharging liabilities of the Business it acquired specifically the dues of the operational creditors including the C & F Agents. Allegedly in its adventure to make big fortunes, Torrent ignored and denied various requests of Elder Pharma to pay off the C & F Agents from the money lying in the ESCROW Account maintained by both companies post execution of BTA. Torrent out rightly defied the terms of the Escrow Agreement between the two companies which provided that pursuant to an order of the Court if any unsecured creditors amount is required to be paid both Torrent Pharmaceuticals and Elder Pharmaceuticals were obligated to jointly instruct the Escrow Agent to release the said amounts to the unsecured creditor. That in the case of C & F agents, the High Court had passed an explicit order for furnishing the bank guarantee, which order ought to have been complied by Torrent. However, having succeeded in keeping the terms of the BTA and other ancillary agreements under wrap, Torrent evaded the said obligation too. After discovery of the BTA it was further learnt by the C & F agents that Torrent furnished a forged and fabricated copy of the Novation Deed before the Competition Commission, which novation deed is materially different from the one which was circulated amongst the C & F Agents. It is believed that in order to secure a favourable Order from  the Competition Commission of India,such illegality was played by Torrent. The C & F agents believe that they have only discovered tip of the ice berg and their lies a mountain ofF fraud perpetrated by both the companies to cheat numerous similarly placed individuals, firms and companies who were the creditors of Elder pursuant to and during the transfer of the business of Elder to Torrent. The C & F agents believe that the matter requires thorough investigation by a specialised agency like CBI, SFIO or EOW to unearth the modus operandi and the magnitude of fraud relating to the so called business transfer of one company to the other. The C & F also raise a question of public importance “could a business of a company be allowed to be transferred without securing its liability and ensuring that its liabilities to its creditors are first met in totality?”

Tehelka sent a questionnaire to key persons at Torrent Pharmaceuticals Limited -Sudhir Mehta, Samir Mehta and Ashok Modi on July 9, 2018 and on July 27, Executive Director, Jayesh Desai sent the following reply:

Mr Ahuja,

This has reference to your letter dated 9th July 2018, received by us on 24th July 2018 (copy enclosed for reference).

Our reply to your above referred letter is as under.

Elder had appointed various C&F Agents for distributing its pharmaceutical formulations in India. It is alleged by these C&F Agents that their commission, security deposits, etc. payable under such arrangement with Elder has been outstanding and that Elder has failed to pay the same. It is clear in the Business Transfer Agreement (BTA) as well as the draft novation deed annexed to the said BTA that outstanding dues of the C&F Agents would be settled by Elder and that the liabilities till the closing date i.e. 29th June 2014, will not get transferred to Torrent. Further, please note that the obligation to obtain novation of C&F Agent’s agreement was solely that of Elder.

We would like to inform you that the said C&F Agents had also initiated arbitration proceedings against Elder and Hon’ble High Court of Mumbai in the Arbitration Petition No. 864 of 2015 of M/s. Pharma Traders & others had pronounced a judgment dated October 29, 2015. It is evident from the judgement that the liability of Elder towards the outstanding dues of the C&F Agents is not even disputed.

It is also evident that neither Elder nor C&F Agents has impleaded Torrent Pharma as a party to such legal proceedings or have stated that liability of such outstanding dues is of Torrent Pharma.

In respect of the Escrow Account referring to the Bombay High Court Order, it was a separate order which was for setting aside amount against claims of specified unsecured creditors and not against all unsecured creditors. The letter from Elder therefore to this extent was neither relevant nor in accordance with the terms of the Escrow Agreement.

Further, the material facts which the said C&F Agents are alleging to be misrepresented and concealed before CCI by Torrent Pharma, are a baseless contention.

From the aforesaid facts, you would appreciate that the allegations raised are only frivolous and baseless in nature.

Jayesh Desai
Executive Director

As some questions remained unanswered, Tehelka asked Torrent to reply and the company confirmed that Deed of Novation was part of BTA:

Dear Mr Ahuja

This has reference to your mail dated 31st July 2018. Our response is as under:-

1. Is Deed of Novation, an integral part of the BTA dated December 13, 2013 signed by you and Elder Pharma
“The draft version of Novation deed was part of the BTA”

2. The Deed of Novation was signed by the Director of Elder Pharma (Original Party) and sent to all their C&F’s (Counter Parties) who in turn signed and returned to Elder Pharma for signatures of Torrent (Acceding party). You were obligated to sign the Deed as per terms of BTA, Did you sign the Deed of Novation, if not, why?
As per the conditions of BTA, Elder was obligated to get the Novation deed signed from CFA by a particular date. Since the condition was not met, we were not obligated to pursue the same further.

3. Apart from Deed of Novation, a separate letter dated December 13, 2013 was issued for concerned authorities as an integral part of BTA and signed by you and Elder Pharma. Are you aware of the contents of this referred letter?
We would be able to comment once we see the contents of the letter you are referring.

Warm Regards
Jayesh Desai

Tehelka supplied to Torrent Pharmaceuticals, a scanned copy of the letter dated December 13, 2013 which was an integral part of BTA and signed by both Torrent and Elder as asked by Torrent. Torrent replied as follows:

Dear Mr Charanjit Ahuja,

We are aware of this letter. However, the same was subject to certain obligations on the part of the seller, details of which we have provided in response to your question number 2.

Jayesh Desai