The Central Bureau of Investigation (CBI) has booked the Dewan Housing Finance Corporation Limited (DHFL), its promoters and others for allegedly cheating a consortium of 17 banks to the tune of ₹34,615 crore. This is the biggest-ever bank fraud case registered by the agency.
Among those arraigned are the DHFL’s then chairman-cum-managing director Kapil Wadhawan, promoter director Dheeraj Wadhawan, Sudhakar Shetty of the Sahana Group, Amaryllis Realtors, Gulmarg Realtors, Skylark Buildcon, Darshan Developers, Sigtia Constructions, Creatoz Builders, Township Developers, Shishir Reality and Sunblink Real Estate.
On Wednesday, the CBI conducted searches on the premises of the accused persons at 12 places in different parts of Mumbai
Incorporated in April 1984, the DHFL extended financial assistance to low and middle income group individuals for buying houses and also engaged in other financial intermediation.
Union Bank of India complaint
The case has been registered on a complaint from the Union Bank of India, which led the consortium. According to the First Information Report, a group of 29 lenders formed in July 2010 initially extended credit facilities to the company. In July 2020, there were 17 consortium members and the quantum of credit facilities was ₹42,871.42 crore.
The loans were sanctioned by lenders in Delhi, Mumbai, Ahmedabad, Kolkata, Kochi, Pune, Chennai, Hyderabad, Mangalore and Bengaluru. This aside, the banks had subscribed to the DHFL’s non-convertible debentures in 2016-18. The company defaulted on its debt payment obligations from May 2019 onwards.
Well before that, several non-banking finance companies were facing problems in fund-raising after the IL&FS Group entities defaulted on its commitments. It was followed by a sharp correction in the DHFL share price. The concerned lenders enquired about its financial health and were told that it was due to the sale of commercial papers by an investor.
Then, in January 2019, media reports alleged fraud via diversion, round tripping and siphoning of funds. Subsequently, the lenders decided to closely monitor the company’s affairs and appointed an auditor to examine transactions from April 2015 to December 2018.
Based on the early warning signals, the Union Bank of India classified the loan as a Red Flagged Account in October 2019 and a lookout circular was issued against the Wadhawans. Meanwhile, proceedings initiated in the National Company Law Tribunal, Mumbai, under the Insolvency & Bankruptcy Code, resulted in the approval of a resolution in June 2021. Since then, the lenders have been able to recover ₹5,977.93 crore and fresh non-convertible debentures of ₹7,186.74 crore.
The audit report highlighted multiple alleged irregularities. A total of 66 entities — which were inter-connected and involved individuals linked to DHFL promoter entities — were extended loans and advances of over ₹29,100 crore, against which ₹29,949.62 crore remained outstanding. Many entities were allegedly controlled by the promoters and several had common addresses, emails, shareholders, directors or partners; 16 had invested over ₹100 crore in the shares or debentures of DHFL promoter entities.
The auditors found that funds diverted or used for investments in entities belonging to Mr. Shetty of the Sahana Group; round-tripped for investments in non-convertible debentures or preference shares of promoter group entities or joint ventures; loans were rolled over without classifying the accounts as non-performing assets; and repayment of interests amounting to several hundred crores were not traceable in the bank account statements in many instances. Funds were also invested in properties.
The FIR alleged that ₹24,595 crore were also disbursed as loans or advances to 65 entities from April 2015 to December 2018, of which ₹11,909 crore was outstanding as on March 31, 2019. While the borrowers had minimal operations, loans were given without adequate documentation. As it turned out, ₹14,000 crore was given as project finance, but was reflected as retail loans in the DHFL books. Consequently, over 1.81 lakh false retails loans — referred as “Bandra Books” in a separate database maintained in a software package — were created.
DHFL-linked entities are already under the scanner of multiple probe agencies for alleged financial irregularities, including the Yes Bank loans. In March 2021, the CBI had booked the company and its promoters for allegedly claiming interest subsidy under the Pradhan Mantri Awas Yojana, using bogus loan accounts opened with its fictitious Bandra branch in Mumbai.
The second biggest loan fraud case involving ₹22,842 crore was registered by the CBI against Gujarat-based ABG Shipyard and its directors in February.