Dewan Housing Finance Limited (DHFL) had allegedly diverted ₹12,773 crore of loans to 79 shadow entities associated with its promoters and close aides, according to a Business Standard report. DHFL diverted the bank money in the garb of retail loans given to one lakh fictitious customers between 2010 and 2015, alleged Enforcement Directorate (ED) in its plea before the special court on Wednesday, January 28.

ED, in its plea, mentioned that Kapil Wadhawan, former Chairman and Managing Director of DHFL, played an important role in siphoning off the money and financing funds to gangster Iqbal Memon (alias Iqbal Mirchi). Promoters of the debt-laden company are also under ED’s radar as it reported that the laundered money was also used to pay for the three houses Memon owned at Worli, Mumbai, as per the Business Standard report.

Wadhawan was arrested by the agency earlier this week in connection with the money-laundering case linked with Memon and his properties. He was remanded to ED’s custody till Friday.

According to another report by The Times of India (TOI), currently ED is scrutinising the 79 shadow entities that exist only on paper and are linked to the accounts of DHFL’s promoters.

According to ED, the scheming of the whole plot has wider ramifications wherein only the preliminary investigation revealed that more than ₹12,700 crore have been diverted illegally. ED believes that the quantum of the scam will likely increase more than two-fold after the investigation. ED alleges that the orchestrator and prime conspirator of the scam was former Chairman, Kapil Wadhawan, TOI reported.

How did DHFL create the facade?

The Business Standard report further disclosed that DHFL’s books of accounts showed that ₹1,500 crore loans (of the ₹12,773 crore) were given to five companies — Faith Realtors, Marvel Township, Able Realty, Poseidon Realty, and Randon Realtors. After providing loans to these shell companies, Wadhawan later amalgamated with Sunblink Read Estate, a company that is also under ED lens for its transaction with Mirchi, adding up to ₹2,186 crore in DHFL’s books.

In 2010, DHFL’s promoter and Kapil’s brother — Dheeraj Wadhawan, struck a deal with Mirchi to acquire properties in Mumbai. Dheeraj bought three properties in the name of Sunblink.

The deal was finalised for the surrender of tenancy rights in favour of Wadhawan’s Sunblink for ₹225 crore. Out of this, ₹111 crore was paid to Mirchi by DHFL and RKW Developers.

ED further explained that DHFL conveniently dodged the finance committee of directors and did not seek their approval before sanctioning loans above ₹200 crore, reported Business Standard .

During the questioning, Kapil Wadhawan stated that there were certain unsecured loans with DHFL and these were to be secured. It is seen that new properties purchased from Mirchi were shown as mortgaged against the existing loans.

DHFL owes ₹83,873 crore to banks, mutual funds, and investors. DHFL is the first non-banking finance company to be referred to the bankruptcy court by the Reserve Bank of India last November, the TOI report added.

Sting operation by Cobra Post

In January 2019, Cobra Post first claimed an exposé of DHFL for diverting up to ₹31,000 crore loan from various banks by creating shell companies.

Rebutting the allegation, DHFL filed a response with BSE saying this is “untrue”. It stated thatthe ₹31,000 crore loans mentioned in the allegation comprise its Project Loan Portfolio.

Last year in July, DHFL’s shares tanked 16 per cent after the company defaulted on debt repayment. Following this, the stock fell over 97 per cent and the government had to intervene.

In October 2019, ED started investigating DHFL’s offices and promoter residences which eventually led to the trail of money laundering activities in loans given to the firm.

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