The administrator of troubled Dewan Housing Finance Corporation Ltd (DHFL) has filed a case of fraud worth Rs 12,705 crore ($1.7 billion) against promoters Kapil and Dheeraj Wadhawan in the bankruptcy court.
An investigation by Grant Thornton India LLP revealed the fraud in loan disbursements towards development of two Slum Rehabilitation Authority projects, DHFL said.
“The preliminary estimation places the monetary impact of the concerned transactions at approximately Rs 12,705 crore (principal of Rs 10,979 crore and accrued interest of Rs 1,726 crore),” the report said.
As per the report, the transactions occurred during 2016-17 to 2018-19.
Going by Business Standard, the company used different loan accounting software pieces to hide fraudulent transactions involving lakhs of fictitious borrowers.
The software helped the company to hide the transactions from the regulators and auditors and showed inflated income to stock exchanges, said Grant Thornton.
The report said the company used FoxPro software to prepare codes for camouflaging actual disbursements and collection of funds by creating 260,315 fictitious home loan accounts.
This month, capital markets regulator Securities and Exchange Board of India (SEBI) barred the Wadhawans from the securities market, accusing them of indulging in fraudulent transactions and misleading investors by releasing false financial statements for over a decade.'
In August, the administrator had filed before the NCLT an application in respect of disbursements of retail loans made to certain entities, referred to as the Bandra Books Entities, worth Rs 14,046 crore as on June end 2019 and Rs 3,348 crore being the amount considered as due and outstanding towards notional loss to the company. These transactions occurred during from 2006-2007 to 2018-19.
DHFL background
In November last year, the Reserve Bank of India (RBI) superseded the board of DHFL and appointed a three-member body to advise the RBI-appointed administrator of the company.
It also filed an application to begin bankruptcy proceedings against the non-banking financial company (NBFC) under the Insolvency and Bankruptcy Code (IBC).
DHFL, once one of India's top NBFCs, owes its creditors -- which include mutual funds, banks, pension funds, insurance firms and retail investors -- close to Rs 1 trillion ($13.93 billion).
The verified claims of financial creditors before the NCLT as on August stood at nearly Rs 87,000 crore.
In October 2019, a forensic audit conducted by KPMG on behalf of the lenders of DHFL found a diversion of over Rs 19,000 crore of bank loans to DHFL’s related entities.
In the same month, the Wadhawans came under the Enforcement Directorate’s scanner, when an investigation into the alleged money laundering activities of Iqbal Mirchi, a close aide of Dawood Ibrahim, discovered a Rs 225 crore land deal between Mirchi and Sunblink Real Estate Pvt Ltd , a company associated with DHFL.
The Enforcement Directorate (ED) has also registered a money laundering case against Yes Bank co-founder Rana Kapoor for allegedly receiving over Rs 600 crore in kickbacks for loans given by the bank to DHFL.
The Wadhawans are under the custody of ED pending a Supreme Court hearing after a stay order of bail granted by the Bombay High Court.