Online media house Cobrapost on Tuesday alleged that promoters of the Dewan Housing Finance Corporation had siphoned off over Rs 31,000 crore in public money between 2015 and 2018. The money was allegedly taken out through secured and unsecured loans and advances to shell companies, illegal round tripping, tax avoidance and insider trading.
Describing it as “India’s biggest financial scam”, Cobrapost claimed the firm’s promoters had transferred around Rs 21,477 crore of its funds to multiple shell companies as loans and investments without making any declarations to the Ministry of Corporate Affairs. It alleged that the shell companies where the money was transferred were linked to or owned by the Wadhawans, who are the firm’s promoters.
“The scam has been pulled off mainly by sanctioning and disbursing astronomical amounts in secured and unsecured loans to dubious shell/pass-through companies, related to DHFL’s own primary stakeholders Kapil Wadhawan [chairman and managing director], Aruna Wadhawan and Dheeraj Wadhawan [non-executive director] through their proxies and associates, which have in turn passed the money on to companies controlled by the Wadhawans,” it claimed.
The money transferred to shell companies was allegedly used to buy shares or equity and other private assets in India as well in the United Kingdom, United Arab Emirates, Sri Lanka and Mauritius. These shell entities were RKW Developers Private Ltd, Skill Realtors Private Ltd and Darshan Developers Private Ltd, all of which are promoted by Kapil Wadhawan and Dheeraj Wadhawans, it added.
According to Cobrapost, banks also loaned money to the company without conducting due diligence. At least 32 Indian banks allegedly sanctioned loans worth Rs 50,000 crore to the company, with the State Bank of India granting Rs 11,500 crore. Foreign banks, including Barclays Banks and Abu Dhabi Commercial Bank, also cleared loans worth $105 million, or over Rs 747 crore.
The allegations come at a time when state-run banks are laden with mounting non-performing assets, or bad loans.
Cobrapost claimed it had “unearthed the scam” by scrutinising records available with public authorities and information available in public domain. It alleged that the company had violated several regulations of the Companies Act, Income Tax Act and the Foreign Exchange Management Act. It also claimed that the company also violated norms under the Reserve Bank of India, Security and Exchanges Board of India, Union Ministry of Finance, Income Tax Department as well the monitoring mechanisms of the banks.
Cobrapost alleged that the scam took place between 2015 and 2018, and the company’s promoters also made political contributions to the ruling Bharatiya Janata Party. “While the BJP declared the Rs 19.5 crore donations, the shell entities donating the cash didn’t,” it claimed.
Cobrapost claimed that DHFL had advanced loans of Rs 1,160 crore to five companies in Gujarat just before state elections for projects that had been cancelled or stalled indefinitely.
DHFL calls allegations frivolous
DHFL in a statement said the company is a publicly listed housing finance company regulated by the National Housing Bank and the Securities and Exchange Board of India, amongst other regulators.
“This mischievous misadventure by Cobrapost appears to have been done with a mala fide intent to cause damage to the goodwill and reputation of DHFL and resulting in erosion in shareholder value,” it said.
The company said its financial statements are submitted to the Stock Exchanges and are in the public domain. “DHFL and its group companies are confident of meeting any scrutiny on any aspect of our operations and will pursue these frivolous allegations to its logical conclusion,” it added.
Yashwant Sinha demands investigation
Former Finance Minister Yashwant Sinha demanded an investigation into the allegations, PTI reported. “If the government fails to order an immediate investigation into the allegations into the aspects including political funding, it would raise a question mark on the intent of the government,” he said. “Therefore, I demand an investigation under court supervision by a special investigative team.”
Sinha said the allegations raise a question mark on the government’s claim of clamping down on lakhs of shell companies. All the agencies, including government regulators, have failed to track nefarious deals, he added.
The company’s shares crashed by 11% in closing trade after the allegations were made public, The Economic Times reported.