DHFL Scam: SEBI Bars Kapil and Dheeraj Wadhawan for 5 Years Over Fund Diversion
The Securities and Exchange Board of India (SEBI) has banned promoters Kapil Wadhawan and Dheeraj Wadhawan for five years from the securities market for alleged fund diversion from Dewan Housing Finance Corporation (DHFL). Besides, the former promoters have also been restricted from holding any key position in the listed company for the said time period.
Market regulator has also imposed a penalty of Rs 120 crore on the individuals. Kapil Wadhawan and Dheeraj Wadhawan have been fined Rs 27 crore each, while non-executive chairman Rakesh Wadhawan and a former non-executive director Sarang Wadhawan face penalties of Rs 20.75 crore each. Meanwhile, joint managing director & CEO Harshil Mehta has been fined Rs 11.75 crore, and a former CFO Santosh Sharma faces a total penalty of Rs 12.75 crore.
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In the order, SEBI stated that DHFL, along with its promoters, directors, and key managerial personnel, have involved in an “egregiously fraudulent scheme” to divert funds to “Bandra Book Entities” (BBEs) linked to the promoters since 2006.
As of March 31, 2019, DHFL had given out loans worth ₹14,040.50 crore to BBEs. The order further held that these BBEs were connected to Kapil, Dheeraj Rakesh and Sarang, directly or indirectly.
Former promoters gave very huge, unsecured loans to these businesses even though they had no assets or actual business operations, the order stated. They did this without proper checks and falsely recorded the loans as retail housing loans, it added.
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The SEBI investigation discovered that the fraud was carried out in multiple stages. The major orchestrators behind the scheme were Kapil Wadhawan and his brother Dheeraj Wadhawan, along with Rakesh and Sarang Wadhawan. The investigation found that the company gave out loans worth ₹5,662.44 crore to 39 businesses, and 40% of that money was then secretly moved to 48 other companies connected to the promoters.
(With inputs from PTI)
