The Central Bureau of Investigation (CBI) has booked Dewan Housing Finance Corporation Limited (DHFL), and sibling duo — Kapil Wadhawan and Dheeraj Wadhawan — in a banking fraud worth ₹34,615 crore, the biggest in the country so far.

The first information report (FIR) dated June 20, 2022, also mentions Sudhakar Shetty and his realty firm Amaryllis Realtors, eight other real estate companies, and unidentified public servants and private individuals in the list of accused.

The investigation agency filed the case based on the complaint by lending consortium leader Union Bank of India made on February 11 earlier this year. The FIR states that DHFL, the Wadhawan brothers — the then directors of the housing finance company, Shetty and other accused entered into a criminal conspiracy to defraud a group of 17 banks.

“... in pursuance of the said criminal conspiracy the said accused kapil Wadhawan and others induced the consortium banks to sanction huge loans aggregating to ₹42,871.42 crore and siphoned off and misappropriated a significant portion of the said funds by falsifying the books of the DHFL and dishonestly defaulted on repayment of the legitimate dues of the said consortium banks, thereby causing a wrongful loss of ₹34,615 crore to the consortium lenders,” the report reads.

In its complaint, Union Bank of India had mentioned that a consortium of lenders was formed in July 2010 with 29 member banks. With several lenders exiting and joining the group, the number of banks as on July 31, 2020 stood at 17, and including State Bank of India, Union Bank of India, Canara Bank, Bank of India, Punjab National Bank, Indian Bank, Bank of Baroda, IDBI Bank, Punjab & Sind Bank, Bank of Maharashtra, Central Bank of India, Indian Overseas Bank, UCO Bank, Federal Bank, HDFC Bank, South Indian Bank and Karnataka Bank.

As per the details furnished by Union Bank of India, as on July 31, 2020, State Bank of India had the highest exposure to DHFL at ₹9,898.76 crore. Bank of India, Canara Bank, Union Bank of India and Punjab National Bank reported exposures to the tune of ₹4,044.34 crore, ₹4,022.52 crore, ₹3,813.41 crore and ₹3,802.09 crore, respectively.

DHFL first started defaulting on its payment obligations to lenders from May 2019 onwards. The lenders in the consortium had termed accounts of DHFL with them as non-performing assets between October and December 2019. These were subsequently classified as fraud between March and August 2020.

As DHFL and several other NBFCs continued to face financial troubles on account of the IL&FS crisis, the shares of the financer saw sharp correction. Around January 2019, reports of serious allegations of fraud against DHFL and its promoters and directors surfaced. While DHFL and Kapil Wadhawan assured lenders of adequate liquidity and efforts to de-stress the company, the HFC continued to default on its payment obligations.

A forensic audit by KPMG revealed disbursement of loans and advances by DHFL to 66 interconnected entities and individuals and with commonalities to DHFL promoters. Of these, 25 entities had minimal operations and were granted loans or inter corporate deposits (ICDs). These 66 entities received ₹29,100.33 crore, against which ₹29,849.62 crore remains outstanding, Union Bank of India had alleged in its complaint.

The KPMG audit flagged significant financial irregularities, diversion of funds, fabrication of books, round tripping of funds, the proceeds from which were then used to create assets for Kapil and Dheeraj Wadhawan.

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