The money was raised by Diwan Housing Finance Limited (DHFL). The largest bank fraud case in India to date, involving the embezzlement of Rs 34,615 crore, is being investigated by the CBI.
Kapil and Dheeraj Wadhwan of DHFL were arrested in connection with the case against others in the most recent case, which was filed on Monday. The Rs. A significant chunk of Rs 42,871 crore, according to the CBI, was allegedly looted. loans, advances, and non-convertible debenture subscriptions.
While advances relate to the credit facility provided to the borrower, which the borrower can utilise to satisfy any short-term demand, non-convertible debentures are a way to raise long-term capital through a public offering.
A copy of the FIR, which claimed that the money was fraudulently obtained by purchasing securities and falsifying book accounts before being routed to DHFL entities as fraudulent loans.
According to a CBI official, “The DHFL purposefully and deliberately defaulted on loans and advances taken from a consortium of banks, inflicting a fake loss of Rs 34,614.88 crore to the banks.”
The CBI and the Enforcement Directorate (ED) are also looking into suspected fraud against Yes Bank involving DHFL promoters, notably the Wadhwan brothers.
Prosecutors claimed that in the Yes Bank instances, the brothers cooperated with the authorities and provided all the papers required for the inquiry.
Presently, it is anticipated that DHFL promoters would invest Rs. It is claimed that Rs 14,000 crore was distributed, however in order to divert money, this sum was recorded in their accounts as “retail loans.”
According to a CBI FIR complaint, this resulted in the formation of a “increased retail debt portfolio” that had over 1.8 lakh fictitious and nonexistent loans.
These planned loans are said to have been documented in a database named “Bandra Books” before being “merged with OLPL Loans (other major project loans)”.
The largest instance of alleged bank fraud in India prior to this one included the ABG Shipyard, where a private company has been charged with embezzling money to the tune of Rs 22,842 crore borrowed from banks.
Table of Contents
Union Bank of India’s complaint
A complaint against the Wadhawans and Sahana Director Group, Sudhakar Shetty, and other defendants was made by Vipin Kumar Shukla, Deputy General Manager of Union Bank of India, on February 11, 2022, according to a CBI source.
According to the CBI officer, the crime committed in this case involved criminal conspiracy, fraud, criminal breach of trust, falsification of the books and accounts, and misuse of official position by government workers.
In accordance with the FIR, DHFL began to miss loan repayment deadlines to creditors in May 2019.
The FIR reported that a creditors conference held on February 1 of 2019 decided to form committees to oversee DHFL’s financial flow. Alvarez & Marcel was thus engaged as a company for “particular oversight”, it continues.
Creditors chose KPMG, an auditing company, to undertake a special review audit on DHFL finance from April 2015 to December 2018, appointing creditors to check for any financial mismanagement or unethical behaviour. This was done at the same meeting. In November 2019, KPMG delivered its review report to creditors.
The organisation is once more hired by creditors to carry out a better audit of DHFL finances from April 2015 to March 2019 in February 2020, the FIR says.
‘Blown the lid off’ by audit
According to the CBI official who was cited above, ThePrint learned via a forensic audit conducted by KPMG in January 2021 that DHFL had made substantial loans and advances to as many as 66 “inter-connected businesses.”
Between 2015 and 2018, 35 of the 66 such organisations received loans and advances. The source said that the remaining 31 related firms were eventually discovered. “Of these 35, 25 entities had modest activity and were awarded loans.
The CBI official stated that there were loans totaling Rs 29,100,33 crore.
35 of these interconnected firms received loans and advances totaling Rs 24,595 crore from 2015 to 2018 according to the FIR.
This is how the money was being redirected, the person claimed
This money, which was given as loans to organizations linked to DHFL, was also used to buy shares and debentures. The source also stated that investments in land and properties made up the majority of these corporations’ and people’s transactions.
The audit also discovered “serious financial fraud,” “diversion of money by relevant persons,” “falsification of records to falsely portray non-existent retail loans,” “round-tripping of cash,” and “usage,” according to the FIR. Money was diverted for the formation of assets by Kapil Wadhavan, Dheeraj Wadhavan, and their allies.
According to emails, Kapil Wadhavan is controlled by many businesses, a CBI officer stated.
The CBI official continued, “It also proves he appointed the directors and auditors of these firms and managed secretarial records, controlling overall finances of these companies.
In its FIR, the investigation agency claimed that loans were given to borrowers with “minimal operations” “disbursed without adequate documentation, without valuation of mortgage securities,” and that money was “diverted, used for investment in entities belonging to Sudhakar Shetty of Sahana Group in a number of instances.”
It continued: “Funds were diverted for investments in joint ventures, promoter group preference shares, and non-convertible debentures. The inter-corporate deposit loans were renewed without designating the accounts as non-performing assets (non-performing asset). In certain cases, it was impossible to track down interest repayments totaling several hundred crores in bank account statements.
In the case submitted to the CBI, it has also been claimed that DHFL and its promoters paid out Rs 14,000 crore as “project funding” to their own firms, although the money was recorded in their books as “retail loans.”
According to the FIR, “this resulted in the formation of an inflated retail credit portfolio, whereby 1,81,664 fake and nonexistent retail loans of Rs 14,095 crore (outstanding as on 31 March 2019) were generated.”
According to the FIR, these retail loans, also known as “Bandra Books,” were arranged in a unique database, according to which it could be shown that DHFL disbursed the loans before they were combined with OLPL loans (other large project loans).
3,018 crore of the sum associated with “Bandra Books” was retained as “unsecured retail loans” as part of the retail portfolio, while 11,000 crore was transferred to OLPL.
“How the large-value loans provided by OLPL were recorded in the Bandra accounts as minor retail loans and how the legal auditors failed to disclose during the audits are the subjects of an inquiry. The CBI official was reported as adding, “It has made it clear that no accountability has been imposed and that the involvement of public workers would also be probed.