DHFL Used Software to Mask Crores Diverted to Shell Firms: ED Charge Sheet

MUMBAI: Dewan Housing Finance Corporation Limited (DHFL) developed a software that automatically split hundreds of crores diverted to its real estate arm through 87 shell firms into thousands of retail loans. This sophisticated method was used to mask the diverted amounts from banking regulators, according to the Enforcement Directorate’s (ED’s) charge sheet into the ₹34,614-crore bank loan fraud case linked to the company.

The investigation has revealed that DHFL promoters Kapil and Dheeraj Wadhawan diverted around ₹11,548 crore from DHFL to 87 fictitious entities—known as Bandra Book firms—for business purposes and personal use. The brothers used the diverted funds to purchase 25 paintings and a sculpture worth over ₹63 crore, expensive jewellery, and a 20% stake in Pune-based Varva Aviation, among other items, the charge sheet said.

The loans were sanctioned in the name of RKW Group, a company named after the initials of Kapil and Dheeraj Wadhawan’s father, Rajesh Kumar Wadhawan, according to the charge sheet, a copy of which was seen by HT. While Dheeraj Wadhawan raised the fund requests, his brother Kapil approved the loans through emails without following any due procedure. A record of these transactions was maintained on an isolated computer that wasn’t connected to the company’s LAN network, the charge sheet said.

The charge sheet named 17 people and entities, including Kapil Wadhawan, Dheeraj Wadhawan, and the RKW Group. According to the probe, Kapil Wadhawan managed DHFL’s housing finance business, while Dheeraj looked after the real estate development business across Mumbai and Pune under the RKW Group.

According to the charge sheet, when the Wadhawans needed funds for their real estate projects and several other personal expenses, they would send one-page letters or cryptic emails to a particular officer at DHFL. Kapil Wadhawan then approved the “loan proposals” without following due procedure by simply replying, “Okay, Approved.” The approved proposals were then forwarded to the concerned bank branch for money disbursal.

The shell companies or Bandra Book firms were directly under the control of Kapil Wadhawan, according to the statement of Harshil Mehta, the former chief executive officer of DHFL. All the accounts of the Bandra Book firms were maintained on a single computer that was isolated and not connected with the housing finance company’s LAN network, Mehta told the ED. The computer was allegedly handled by very few close associates of Kapil Wadhawan.

The loans were then allegedly sanctioned as retail or home loans by bypassing all retail credit policy norms and without consulting the company’s retail, property, legal, or sales teams. Despite officially closing in 2004, the Bandra branch of DHFL was kept alive only because of the Wadhawan brothers’ surreptitious instructions, the charge sheet said.

As soon as the funds were illegally diverted to the group firms, they were then split into smaller amounts and recorded as retail or home loans for 260,000 fictitious loan accounts in the company’s database management software, the charge sheet said. The software, called FOXPRO, would then automatically generate fake data of multiple small home loans—mostly using details of DHFL’s earlier customers—in order to inflate the company’s retail loan books for further funding.

The ED’s money-laundering probe against the company is based on a case registered by the Central Bureau of Investigation (CBI) on February 11, 2022. The CBI began its investigation after a consortium of 17 banks led by the Union Bank of India alleged that the DHFL promoters conspired with their associates and got the banks to sanction loans amounting to ₹42,871 crore between January 2010 and December 2019. The subsequent loan defaults allegedly resulted in losses of ₹34,615 crore to the consortium.