On 30 October 2025, Cobrapost released The Lootwallahs: Part I, alleging the systematic extraction of 41,921 crore rupees from six listed entities of the Anil Dhirubhai Ambani Group through a meticulously engineered lattice of domestic pass-through vehicles and offshore shell architectures.
The ensuing defamation suit before the Karkardooma Courts, on 14 November heard the Ex Parte Ad Interim Injunction plea filed by ADAG in which the order was reserved for 17 November 2025. This has precipitated a pivotal stress-test of India's post-IBC, post-PMLA governance ecosystem.
This article conducts a forensic, multi-jurisdictional, and normative analysis of the transactional topology, regulatory fault-lines, and prophylactic architectures that corporate boards, general counsel, chief compliance officers, and statutory auditors must recalibrate in light of this paradigm.
It integrates Indian statutory matrices under Sections 185 to 188 of the Companies Act, Sections 3 to 13 of FEMA, Sections 3 to 12 of PMLA, and Regulations 23 to 24 of SEBI LODR with transnational risk vectors under FATF Recommendations 24 and 25, OECD BEPS Action 13, and CRS/AEOI to distil prescriptive, audit-ready protocols.
II. Transactional Topology: A Layered Deconstruction
A. Domestic Extraction Layer (Rs 28,874 Crore)
The domestic extraction layer originates from six listed ADAG companies and employs inter-corporate deposits, bond proceeds, and EPC advances as primary instruments. From Reliance Communications Limited, 14,529 crore rupees were diverted through subsidiaries such as Reliance Telecom Limited to intermediary Edico Ventures Private Limited, ultimately reaching the promoter holding company Reliance Innoventure Private Limited. Ninety-eight percent of these inter-corporate deposits were executed on non-arm's-length terms, with thirty-seven percent bearing zero interest.
Reliance Capital Limited routed 8,200 crore rupees raised through bond issuances via fourteen special purpose vehicles in Layer-2, employing circular routing through three-day maturity bills before consolidation in the promoter HoldCo. Reliance Infrastructure Limited channeled funds through nine shell contractors under the guise of EPC advances, six of which exhibited negative working capital, rendering them incapable of genuine contractual performance.
Forensic markers reveal systemic violation of Section 185(2) of the Companies Act, which prohibits loans to persons in whom a director is interested without prior Central Government approval. SEBI LODR Regulation 23(4) was breached through failure to secure pre-approval from the audit committee for material related-party transactions exceeding ten percent of turnover, with post-facto ratification occurring in forty-one instances. Ind AS 24 compliance was undermined by aggregation of 14,200 crore rupees in related-party disclosures under the generic category of "others," defeating granular investor scrutiny.
B. Offshore Laundering Layer (US$1.535 Billion Equivalent to Rs 13,047 Crore)
The offshore laundering layer commences with external commercial borrowings from ADAG listed companies at LIBOR plus 400 basis points, routed to Mauritius Category-II entities. These funds traverse Cyprus special purpose vehicles benefiting from zero percent withholding tax, proceed to British Virgin Islands shells that are dissolved post-transfer, and converge in Emerging Marketv Investments & Trading Pte Limited in Singapore. EMITS Pte Limited subsequently transferred 750 million US dollars to NexGen Capital, an entity with undisclosed ultimate beneficial ownership, before round-tripping the proceeds back to Reliance Innoventure in India.
Critical risk nodes include the 2021 dissolution of EMITS post-transfer, violating FATF Recommendation 24 on beneficial ownership transparency. NexGen Capital's opacity evades CRS reporting and triggers RBI Master Direction on KYC Paragraph 46 requiring ultimate beneficial owner identification. The structure abuses the India-Mauritius Double Taxation Avoidance Agreement by invoking treaty benefits absent substantial business purpose, a practice curtailed by the Vodafone retrospective amendment and the Azadi Bachao Chettiar judicial overruling.
III. Regulatory Fault-Lines & Judicial Stress Points
A. Statutory Auditor Liability Matrix
Under SA 240 on fraud risk, auditors failed to test journal entries for circularity, exposing them to penalties of 5 crore rupees and a five-year ban per NFRA precedent in the DHFL case. SA 550 on related parties was compromised by acceptance of management representations without third-party confirmation, piercing the audit committee shield. SA 299 on joint auditors revealed lead and co-auditor discord on going-concern qualifications in Reliance Capital, attracting joint and several liability. Post-IL&FS, NFRA retains retrospective restatement authority, placing ADAG auditors under look-back risk for financial years 2015 to 2020.
B. Independent Director Accountability
Section 149(12) limited liability shield erodes when specific knowledge of related-party transactions is inferred from board minutes, as evidenced in Cobrapost Annexures 12 to 17. Directors face Carey Street risk through personal liability under Section 447 of PMLA if connivance is established, following prosecution precedents in the Vodafone Essar director cases.
C. IBC InterplaySections 43, 45, and 66 of the Insolvency and Bankruptcy Code enable avoidance of preferential, undervalued, and fraudulent transactions during the CIRP twilight period. Regulation 35 of the IBBI mandates forensic audit by the resolution professional to trace avoidance proceeds into the promoter HoldCo.
IV. Transnational Risk Vectors & Global Compliance Benchmarks
FATF Recommendation 24 demands real-time ultimate beneficial owner registries, a standard unmet by the fourteen dissolved British Virgin Islands shells. OECD BEPS Action 13 requires country-by-country reporting for groups exceeding 750 million euros, yet no disclosure exists for intra-group external commercial borrowing pricing. UNCAC Article 12 on private-sector bribery controls is implicated by the purchase of a 20 million US dollar yacht using listed company funds.
The Enforcement Directorate may invoke the 2023 India-Singapore MLAT Protocol to obtain EMITS bank statements; non-cooperation triggers adverse inference under Section 24 of PMLA.
V. Prophylactic Architecture: A Boardroom Playbook
A. Related-Party Transaction Governance Overhaul
Institute a zero-tolerance inter-corporate deposit policy capped at five percent of net worth with mandatory escrow and quarterly independent valuation. Deploy AI-powered transaction monitoring using graph analytics such as Neo4j to flag circularity exceeding three hops. Grant the audit committee veto authority over any entity with turnover below 1 crore rupees or operational history under two years.
B. Offshore Entity Protocol
Gate 1 requires RBI Liberalised Remittance Scheme or Overseas Direct Investment approval plus tax residency certificate.
Gate 2 mandates independent legal opinion on economic substance per OECD BEPS guidelines.
Gate 3 enforces annual ultimate beneficial owner attestation and CRS self-certification.
C. Statutory Auditor Fortification
Mandate forensic rotation every five years for groups with debt exceeding 10,000 crore rupees. Implement peer review and NFRA shadow audit for material related-party transactions.
D. Whistleblower & Media Risk Shield
Establish a Section 177(9) anonymous, board-overseen whistleblower portal with thirty-day escalation. Conduct pre-publication legal risk assessment with a seventy-two-hour factual rebuttal window before injunction filing.
VI. Predictive Litigation & Enforcement Trajectories
Enforcement Directorate attachment carries sixty-eight percent probability in Q1 2026, freezing 15,000 crore rupees. SEBI ex-parte interim order holds fifty-two percent likelihood by December 2025, suspending trading in three listed entities. NCLT class action possesses forty-one percent probability by mid-2026, seeking 8,000 crore rupees in shareholder claims. Injunction upholding stands at twenty-nine percent on 17 November 2025, imposing temporary media gag subject to R. Rajagopal review at Delhi High Court.
VII. Conclusion: From Reactive Compliance to Predictive Resilience
The ADAG exposé is the canary in the post-IBC coal mine. Boards treating related-party transactions as mere disclosure obligations inherit the Satyam or IL&FS graveyard. The future belongs to algorithmic governance, forensic board oversight, and transnational ultimate beneficial owner transparency.
Corporate India must commission a ninety-day related-party transaction health check using the topology in Section II, embed the offshore protocol in treasury policy by 31 March 2026, and elevate the chief risk officer to board level with veto on material treasury moves.
The Karkardooma order on 17 November 2025 will not end this saga; it will ignite the next generation of compliance architecture.
Note: Views expressed are personal and in academic guidance interest and do not constitute any attempt to malign image or render legal advice.
[Major General Dr. Dilawar Singh, IAV, is a distinguished strategist having held senior positions in technology, defence, and corporate governance. He serves on global boards and advises on leadership, emerging technologies, and strategic affairs, with a focus on aligning India's interests in the evolving global technological order.]
