Questions raised by INC 42 and response[s]:
1. Did Videocon transfer funds to a company owned by Duggal post which the funds were allegedly transferred to Videocon’s overseas entities.
No.
Videocon loaned funds to entities associated with Mr Duggal (where he was a minority shareholder alongside other institutional investors) between 2008 and 2011. These were Indian on-shore transactions and were paid back by January 2012. Entities associated with Mr Duggal never transferred any monies to any off-shore Videocon Entities.
2. Did Duggal not appear following a summons from the ED in 2022 in the investigation?
Mr Duggal has till date not received any summons from the ED in compliance with due legal process i.e. the Mutual Legal Assistance Treaty [‘MLAT’] Process. Thus, effectively there is no service of summons on him.
Despite this, Mr Duggal has provided over 3000 pages of information sought to the ED and his representatives have met the Agency to extend full cooperation.
3. What did your counsel refer to ED as “abusing its powers, provisions of law, in as much against a person who has been cooperating wholeheartedly with it”.
The NBW issued for alleged non-compliance of summons has been challenged before the Delhi High Court on the grounds inter alia that the NBW has been issued contrary to legal provisions (ie MLAT) and furthermore, the ED didn't tell the court (a) they had initiated the MLAT process and the summons under that process were yet to be served on Mr. Duggal and (b) they had previously approached another court in Mumbai seeking NBW for Mr. Duggal’s appearance on summons and and has expressly told the Mumbai Court that he is being summoned as a witness, also recorded in the Court order dated 03.02.2203. The Mumbai Court had rejected the ED’s request on the basis that you cannot issue an NBW to a witness. The challenge is pending before the Delhi High Court.
4. Mr Saurabh Dhoot held shares in SD Squared Pvt Ltd aka (SD2 Labs)in 2012, which was rebranded to Engineer.ai in June 2018 and then later to Builder.ai,
so on what basis has it been claimed that he was not associated with the company from the very beginning?
● Mr Dhoot held shares in SD Squared in 2003 and until 2008.
● Engineer.ai Corp was incorporated in Delaware several years later, in 2015. Between 2003 and 2008, Builder.ai/EAI as a concept did not even exist and began operations only in late 2015.
● SD Squared was a consulting company and was later (2017/2018) under advice from financial advisors restructured into being part of the Engineer.ai/Builder.ai Group. At this stage, Mr Dhoot had no equity in the company.
● In the restructuring, the legacy consulting activities were fully suspended.
● Builder.ai is the d/b/a name of Engineer.ai Corp. and its subsidiaries.
5. This Press release claims Videocon was one of the customers using Engineer.ai’s products. Please state how much revenue did Engineer.ai earn from Videocon and was this disclosed as a related party transaction?
● The press release doesn’t claim/state that Engineer.ai/Builder.ai provided any services to the Videocon group.
● Builder.ai built software (CRM + Customer App) for Videocon d2h (publicly listed on the Nasdaq), which was later acquired by Dish TV in March 2018. The total value was less than $1m which is an insignificant / miniscule percentage of the total revenue for Builder.ai Group in 2018 alone.
● This is not a related party transaction as confirmed by counsel.
6. Please provide proof of the disclosure of these related party transactions
These are not related party transactions.
7. What were the services provided by Engineer.ai to Videocon?
· Repetitive question. See our response to question #5.
8. Is Builder.ai separate from Engineer.ai or is it the same company which released a product with a different brand name?
Builder.ai is the trading name (dba) of Engineer.ai Corp. and its subsidiaries.
9. “It is alleged by ED that there have been transactions between the Plaintiff No.2 (SDD) prior Company (not Builder.ai) and the Videocon Group” but SDD has denied it. Yet, shares were transferred by Mr S Dhoot to Mr Duggal’s mother and also to another Videocon subsidiary. Please explain this discrepancy
Mr Duggal has not denied that there were transactions between his prior company (where he was a minority shareholder) and Videocon Group.
- These transactions occurred between the period of 2008 and January 2012.
- The loans were paid back in full by January 2012, well before the loans by SBI to Videocon [April 2012-2014], as mentioned in the FIR dated 23.06.2020.
- Clearly, therefore, there is no nexus between the alleged proceeds of crime and the transactions between Mr Duggal’s previously associated entities and Videocon as they predated the loans by SBI to Videocon.
- The loans to Nivio Group (2008 - 2011) obviously could not have been from the monies loaned by SBI to Videocon in April 2012. The ED is investigating the use by Videocon of the funds loaned by SBI, which loan was made much after the loans to Nivio Group were repaid in full.
Mr Dhoot never sold his shares in SD Squared Pvt Limited to Mr Duggal’s mother.
· Mr Duggal’s mother invested in SD Squared Pvt Ltd in 2008 (when it was a consulting company) and purchased 40,000 new shares. We do not understand why her investment in the consulting company is relevant.
10. According to the notice: “Mr. Saurabh Dhoot voluntarily resigned as a director in December 2022 and from all his roles in the business of the Plaintiff in the same month. He has had no role at the Plaintiffs Company since then and owns a small amount (<0.1 % ) of equity that pertains to options he exercised.”
1. What was the peak shareholding percentage or equity owned by Mr S Dhoot during his time with the company?
~0.1%.
2. What was the role Mr S Dhoot played in respect to this equity? He exercised some of the options granted to him in his capacity as a consultant.
3. What was the amount paid to Mr S Dhoot in respect of the options he exercised as claimed in the notice?
· No amount was paid to Mr S Dhoot in respect of the options he exercised.
4. “Mr. Dhoot was not involved in the Company during the Series D funding round in May 2023.” Was he involved in previous fundraises and how much money did he make from secondary share sales during previous fundraises?
He was never involved in any equity funding for the company.
11. “Videocon loaned approximately $ 3.79m to Nivio Group and the loan was repaid by conversion from loan to equity; the entire transaction was between 2008 and January 2012.” Please make conforming changes to the answer based on changes to answer to Q. 9 above.
- As noted above, these transactions occurred between the period 2008 and Jan 2012.
- The loans were paid back by January 2012 i.e. much prior to the period of the loans by SBI to Videocon [April 2012-2014] as mentioned in the FIR dated 23.06.2020.
- Hence, there is no nexus between the alleged proceeds of crime and the transactions between Mr Duggal’s previously associated entities and Videocon as the loans by SBI to Videocon had not even been done.
- The loans to Nivio Group (2008 - 2011) could not have been from the monies loaned by SBI to Videocon in April 2012. The ED is investigating the use by Videocon of the SBI Loan, which was made much after the loans to Nivio Group.
1. How much of this loan was repaid by Nivio Group and how much was converted to equity?
■ The entire loan was converted into equity. This was done in a two step process since the loan made to Nivio Group was in India and the equity was in the parent of Nivio India. The second step of the process required the entire Indian loan to be repaid.
■ As noted multiple times, all of the above was done by Jan 2012 so it is not relevant to the investigation of Videocon’s use to funds loaned to it subsequently in April 2012.
2. What is the current value of this equity?
■ The company is no longer active.
■ As noted multiple times, all of the above was done by Jan 2012 so it is not relevant to the investigation of Videocon.
3. What was the peak shareholding percentage or equity owned by Videocon in the Nivio Group?
■ They were a minority investor; their investment was completed before the SBI Loan in April 2012. This is therefore not relevant.
4. Does Nivio Group exist as a company or has it been dissolved?
■ The company is no longer active
■ As noted multiple times, all of the above was done by January 2012 so it is not relevant to the investigation of Videocon.
5. If it has been dissolved, were shareholders repaid any of the capital invested?
■ No.
6. Was Videocon paid any amount at the time of the dissolution of the company in exchange for the equity held by the group?
■ No
12. ED application says about SDD: “He is one of the suspect in the case as the proceeds of crime is routed through the companies controlled and managed by him it has to be ascertained whether the proceeds of crime has been parked with him or the companies managed by him either in India or abroad it is further submitted that it is the fact that the proceeds of crime has been transferred by M/s VIL to Nholdings SA, a company the then controlled by him and the same has never been returned back to VIL” Despite denial by the company, ED says Mr Duggal is a suspect and does not mention any repayment by NHoldings as claimed in the suit notice. Please give us a statement clarifying this discrepancy.
1. As noted multiple times, Nivio Group fully repaid the loans to Videocon by January 2012. The loans by SBI to Videocon occurred between April 2012 and 2014 [as per the FIR dated 23.06.2020 and ECIR dated 30.06.2020]. As such, the loans to Nivio Group could not possibly be considered proceeds of crime as they predate the loans by SBI to Videocon.
2. ED has stated to the Mumbai Court (recorded in the order dated 03.02.2023)___ and in the subsequent application to the Delhi Court that Mr. Duggal is not an accused in the investigation of Videocon.
13. “Mr [Saurabh] Dhoot was never employed by the company; he was a consultant for a short period of time”
1. What was the remuneration paid by the company to Mr S Dhoot for his role as consultant?
■ Please explain the relevance of the query. Without prejudice, Builder.ai is bound by confidentiality clauses in respect of this information.
2. Was this a fixed remuneration or did it have attached variable bonuses?
■ Please explain the relevance of the query. Without Prejudice, Builder.ai is bound by confidentiality clauses in respect of this information.
3. What were the performance benchmarks set for the variable bonus payouts, if any
■ Please explain the relevance of the query. Without Prejudice, Builder.ai is bound by confidentiality clauses in respect of this information.
4. What was Mr Dhoot’s day-to-day role as consultant?
■ Consulting the company regarding general business matters and special projects.
5. How many monthly hours was Mr Dhoot engaged for as a consultant?
■ Varied monthly, but generally not more than 2 weeks per month. Mr Dhoot had other business interests and obligations.
6. Was Mr Dhoot a director on the boards of SD Squared and/or Engineer.ai and/or Builder.ai?
■ From October 2018 till December 2022 Mr Dhoot was on the Board of Engineer.ai Corp.
7. Was Mr Dhoot given inspection rights in Engineer.ai and/or Builder.ai as part of his role as director or consultant?
■ No
8. Was Mr Dhoot given auditing rights in Engineer.ai and/or Builder.ai as part of his role as director or consultant?
■ No
9. Was Mr Dhoot material to finance operations at Engineer.ai and/or Builder.ai?
■ No.
10. Was Mr Dhoot a signatory on any bank accounts associated with Engineer.ai and/or Builder.ai?[1]
■ In his capacity as a Board member, he was added to a limited set of bank accounts from Dec 2019 to June 2022 shortly before he started to wind down his involvement.
14. “The representative of the Plaintiff No. 2 visited the ED office and submitted various documents” Please clarify which documents were requested by the ED in relation to its investigation.
· Given that the ED investigation is still ongoing, we cannot disclose such information at this time.
15. According to ED, “On 23.10.2011 a loan agreement of USO 2.5 million was signed between Sachin dev Duggal and Jupitor Corporation INC wherein Sachin Dev Duggal was lender and Jupitor Corporation INC was borrower. From the above discussion referred in para. i and j above it has been clear that VIL has transferred funds to Sachin Dev Duggal group of companies in India and correspondingly Sachin Dev Duggal companies have transferred the funds to Videocon group overseas companies.” Please send us a statement clarifying these transactions
- Mr Duggal never transferred any funds to Jupitor Corporation or to any Videocon group entities outside or inside of India.
- Mr Duggal directly transferred ~$2M to nHoldings SA Capital Increase Account to help Videocon complete its loan-to-equity transfer.
- These transactions were pursuant to advice of counsel. As part of the conversion of Loan to Equity the following steps had been taken:
a. ~170M INR was loaned to Nivio India between 2008 and 2011 (before the loans by SBI to Videocon)
b. Videocon Group then invested fresh equity capital in nHoldings SA during 2011]
i. A part of this fresh equity capital was directly paid by Mr Duggal to nHoldings SA (via the $2m loan) as Videocon didn’t want to reinvest the money nor take additional exposure.
ii. The fresh injection was then paid from Nivio’s parent to Nivio India and the entire Videocon loan was paid back by Jan 2012 in India.
17. ED says: “On 25.05.2011, a share purchase agreement was executed between nHoldings SA and Jupitor Corporation INC wherein Jupitor agreed to invest CHF 3,789,900 at a price of CHF 563.55.The agreement was signed by Sh. Sachin Duggal on behalf of nholdings SA. However, the financial statement of nHoldings SA of 2010 there was mention of share price as CHF 597.28 per share. There was discrepancy in the share prices in the agreement and the financial statement of the company.” Please send us a statement clarifying this discrepancy
Given that the ED investigation is still ongoing, we cannot disclose such information at this time.
However, the limited clarification we can provide is that Videocon’s SPA included a small discount (approx 6%) to take into consideration the interest for the monies lent.
17. According to ED application: “In November 2011, VIL had transferred funds equivalent to USD 1,952,964 to nholdings SA through a complex web of companies using various layers including Videocon Global Limited, Jupitor Corporation, M/s Goldcoast lnvex INC and M/s Global EPC Ventures Limited (all Videocon group overseas companies). Global EPC ventures limited had transferred the funds amounting to USO 1,952,964 to M/s nHolding SA on 23.11.2011.” Please send us a statement clarifying these transactions
· We do not have access to Videocon company accounts or how they invest.
18. “Jupitor Corporation and Global EPC Venture Limited during the period from 19.10.2012 to July 2014 transferred funds to Sh. Sachin Duggal. However, no supporting evidence was provided regarding the purpose of these payments.” Please send us a statement clarifying these transactions
1. Videocon repaid the $2M loan.
2. As you can see from the excerpt you included in question #5, full supporting documentation was provided to the ED, including a fully executed loan agreement signed by Jupitor Corporation.
19. Please send us a statement clarifying the below transaction, as stated by ED in its application:
“Mr. Saurabh Dhoot S/o Sh. P N Dhoot was promoter, shareholder and director of SD Squared Pvt. Ltd (Later name changed to Engineer.ai India Pvt. Ltd) having 5000 shares. However, the shareholding of Saurabh Dhoot was diluted to 10% by way of issuing of fresh shares to Mrs. Shashi Duggal mother of Mr. Sachin Dev Duggal on 08.11.2008. Saurabh Dhoot transferred its shareholding to Sudarshan Appliances Pvt. Ltd., an entity of Videocon. The shareholding of Sudarshan Appliances (Videocon Group entity) was further reduced and diluted to 0.5% in 2017 on receipt of FDI from M/s Engineer.Al International Limited, Mauritius by issuance of new shares. Thus, Engineer.ai International ltd holds 95% of the total shareholding of SD Squared Pvt. Ltd.” Further, in December, 2018, the 5000 shares of SD Squared Pvt. Ltd. was transferred from M/s Sudarshan Appliances Private Limited which is owned and controlled by Videocon Group to Engineer.ai Global limited for total consideration of Rs. 325000/- @ 65 per share. Subsequently the entire shareholding has been transferred to M/s Engineer.Al Global Limited, at Rs. 15.25 per share. However, no explanation has been provided for payments of higher share price to Sudarshan Appliances.[2]
1. Mr Saurabh Dhoot was a shareholder in SD Squared Pvt Limited till Nov 2008. SD Squared Pvt Limited was a consulting business that predated Engineer.ai / Builder.ai
2. Mr Saurabh Dhoot transferred / sold his shares to Sudarshan Appliances - from our KYC & ROC records, neither Mr Dhoot nor Videocon were ever shareholders of Sudarshan Appliances Private LImited.
3. Mrs Duggal invested 400,000 INR into the company on Nov 8th 2008 when Mr Dhoot exited the company. The consulting company needed cash.
4. Engineer.ai Corp incorporated in late 2015.
5. In order to bootstrap (self funding)the company, Mr Duggal was advised to restructure SD Squared Pvt Limited as the Indian subsidiary given its trading history and, coupled with a mortgage on his mother’s house, he took a working capital line from a Bank.
6. In Mar 2017, the company was restructured and shares were issued to EIL via private placement. The fair market value of the shares was determined by an independent third-party valuation that was duly approved and reflected in the approval letter by the RBI.
7. By Dec 2018, the final step of the restructuring was completed and an updated independent third-party valuation was done.
i. Sudarshan sold its equity at such FMV per share as did Engineer.ai International Limited to Engineer.ai Global Limited which happened at the same time.