CBI raids at Subhiksha's offices, promoter's residence

CHENNAI/DELHI: The Central Bureau of Investigation on Saturday raided the offices and residence of R Subramanian, promoter of the fallen retailer Subhiksha Trading Services, for alleged diversion of a bank loan.

The raids followed a complaint by a public sector bank regarding diversion of Rs 70 crore, according to several people aware of the development.

CBI spokeswoman Dharini Mishra confirmed the raids. She said, ""It is a case relating to a fraud of Rs 70 crore. The loan was diverted for purposes other than what it was meant. Defaulted on payback.""

Subramaniam could not be reached for his comments. The name of the bank could not be verified immediately.

Subhiksha, which at its peak ran 1,600 stores across the country, collapsed in 2009 following a severe cash crunch. The collapse triggered a spate of litigations as well as allegations of irregularities.

Following this, Subhiksha became the first major retail chain to be referred for corporate debt restructuring.

One of the more high-profile legal battles it has had since then has been with Zash Investments, the investment vehicle owned by Wipro founder Azim Premji. In 2008, Premji acquired a 10% stake in Subhiksha from ICICI Ventures, paying Rs 230 crore in the process.

The allegations against the company are now being probed by the Serious Fraud Investigation Office, the financial investigation arm of the Ministry of Corporate Affairs.

Last year, the Madras High Court ordered the winding up of Subhiksha based on a complaint by Kotak Mahindra Bank, one of the lenders to the retail chain. The company owed banks some Rs 750 crore.