Sebi Cracks Down on Dewan Housing Finance for Fraudulent Scheme

Sebi has banned Dewan Housing Finance Corp Ltd's ex-CMD Kapil Wadhawan and others from securities markets for up to five years. The penalties, totaling Rs 120 crore, follow fund diversion and book fabrication allegations. The investigation revealed fraudulent loans to entities linked to the Wadhawan family.

The Securities and Exchange Board of India (Sebi) has issued a significant ruling against Dewan Housing Finance Corp Ltd (DHFL) and its former executives, including ex-CMD Kapil Wadhawan and ex-director Dheeraj Wadhawan. The regulatory body has banned them, along with four others, from accessing the securities markets for up to five years. Additionally, a hefty cumulative penalty of Rs 120 crore has been imposed for alleged fund diversion and book fabrication.

In a detailed 181-page order released on Tuesday, Sebi highlighted that since 2006, top officials of DHFL, including its promoters, have executed a fraudulent scheme to channel funds to entities connected to the Wadhawan family, known as the 'Bandra Book Entities' (BBEs). By March 2019, loans disbursed to these entities stood at a staggering Rs 14,040.50 crore. The investigation unearthed that massive unsecured loans were issued to these BBEs without any assets or business to warrant such financial exposure.

Moreover, these mismanaged loans were incorrectly categorized as retail housing loans, misleading investors and affecting DHFL's stock performance. Sebi revealed that fake loan accounts and fictitious interest income were part of an elaborate cover-up. As a result, apart from the market bans, substantial fines have been levied on the accused, establishing a stern warning against corporate misconduct.

(With inputs from agencies.)