InvestorQ : What is this huge fraud that Dewan Housing has committed and will it impact PEL, which has acquired DHFL?
indhumathi Sayani made post

What is this huge fraud that Dewan Housing has committed and will it impact PEL, which has acquired DHFL?

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2 months ago
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If the CBI is on track then India may witness the biggest banking and financial fraud in its entire business history. Just a couple of days back, the CBI booked DHFL (the corporate entity), former CMD Kapil Wadhawan and director Dheeraj Wadhawan on charges of perpetrating a banking fraud to the tune of Rs34,615 crore. Yes, you absolutely heard the number right. This was followed up by a CBI team raiding over 50 officials doing coordinated searches on 12 premises in Mumbai; that belonged to the Wadhawan family.

Clearly, the allegation is there and so is the intuitive number. What the CBI really needs now is the hands-on evidence to ratify these claims of a massive fraud of money laundering. The group has also been accused of concealment of information. In addition, the CBI also raided the premises of builder Sudhakar Shetty and 9 other realtors in this connection. Many of these were apparently connected instruments and were used as shell companies to create fictitious transactions and launder money.

The CBI case is based on a complaint filed by Union Bank, which headed the 17-member lending consortium. This consortium had provided lending facilities to the tune of Rs42,871 crore to Dewan Housing between 2010 and 2018. Union Bank has accused the Wadhawan brothers of misrepresenting the truth and concealing critical facts. Apparently, their breach of trust had led to losses of Rs34,614 crore for the consortium. This was driven home by the forensic audit conducted by KPMG.

The modus operandi was that the promoters diverted funds, fabricated books of accounts and also round tripped funds under fictitious names and entities. In short, money was laundered out in the form of loans to borrowers and then were declared as NPAs. In reality, these funds were laundered out into personal accounts of the promoters and related parties. The fraud at DHFL had come to light in 2018 and 2019, after the RBI tightened the funding screws for NBFCs in the aftermath of the IL&FS crisis.

The scale is huge. A total of 66 fictitious entities, indirectly connected to DHFL promoters, were given loans of Rs29,100 crore with most of the funds ending up in promoter personal accounts. Some of the devious methods included rolling over NPA loans without classifying as NPAs, untraceable repayments, unexplained moratoriums etc. This is not likely to impact the deal done by PEL since it was a takeover that was provided immunity from the consequences of any previous fraud that may come to light.

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