The Enforcement Directorate (ED) recently attached assets worth Rs 415 crore of Maharashtra’s two builders in relation to the Yes Bank-DHFL bank loan fraud-linked money laundering case. The DHFL scam is India’s biggest financial fraud involving Rs 34,000 crore, in which a total of 17 banks have been defrauded by this home loan provider. According to an RBI estimate, the total credit of the Indian banking system was at Rs 120 lakh crore till May 2022. Here’re four biggest financial scams in India:
The Rs 34,000-Crore DHFL Scam
A consortium, comprising 17 lenders, had extended credit facilities of Rs 42,871 crore between 2010 and 2018. In January 2019, DHFL was hit by an investigation after media reports on allegations of siphoning off of the funds surfaced.
The lenders held a meeting on February 1, 2019, and appointed KPMG to conduct a “special review audit” of DHFL from April 1, 2015, to December 31, 2018. The banks also issued a look-out circular against Kapil and Dheeraj Wadhawan on October 18, 2019, to prevent them from leaving the country. Union Bank of India (UBI) has alleged that KPMG, in its audit, red-flagged diversion of funds in the garb of loans and advances to related and interconnected entities and individuals of DHFL and its directors.
The scrutiny of account books showed that 66 entities having commonalities with DHFL promoters were disbursed Rs 29,100 crore, against which Rs 29,849 crore remained outstanding.
This caused a loss of Rs 34,615 crore to the 17 banks in the consortium.
ABG Shipyard Scam
The fall of shipbuilding giant Gujarat’s ABG Shipyard is a textbook example of financial overreach and it has now been booked by CBI for allegedly causing losses of Rs 22,842 crore to a consortium of 28 banks.
What has baffled observers is that banks continued to lend generously to ABG Shipyards despite red flags. Now, it has been reported that the funds were diverted through 98 sister concerns and finally this year, CBI issued lookout notices against promoter Rishi Agarwal, and executives Santhanam Muthuswamy and Ashwini Kumar.
– The downward spiral could have started in 2008 with the global fallout of the Lehman Brothers crisis. Still, until the end of 2012-13, ABG Shipyard was reaping profits.
– A major sign of distress was when in 2015, State Bank of India’s attempt to restructure loans to ABG Shipyard failed as the company proved incapable of servicing either the interest or the installments on due dates.
– For a company that boasted sprawling shipyards, international clients, government orders, a license to build defense ships and submarines and had over 55 subsidiary companies, the fall from grace came in 2015-16, when its promoters started jumping ship.
– Creditors initiated legal proceedings and the Directorate of Revenue Intelligence, Mumbai, issued a show-cause notice alleging fraud by ABG employees. The account was labeled as a non-performing asset (NPA).
– By 2019, SBI finally had a massive fraud staring at them and an Ernst and Young forensic audit noted “diversion of funds, misappropriation, and criminal breach of trust, with an objective to gain unlawfully at the cost of the bank’s funds”.
– The murky dealings behind a 2007 Rs 50-crore MoU for a maritime university also imploded and in 2019, the National Company Law Tribunal (NCLT) ordered the liquidation of the company under Section 33 of the Insolvency and Bankruptcy Code.
– The company is now credited with India’s second biggest bank fraud, and the banks that got affected were 28 institutions including State Bank of India (SBI), IDBI and ICICI.
The Amtek Auto Case
In May 2022, a complaint by a whistleblower blew the lid off an alleged Rs 12,000-crore fraud by Amtek Auto promoters when it was sent to the Central Bureau of Investigation (CBI), the Enforcement Directorate (ED) and even to the Prime Minister’s Office.
– The complaint named 27 employees of the Amtek Group who were allegedly the conduits for the Dham family to channel and siphon off funds.
– According to reports, complainant Jaskaran Chawla, an advocate at the Delhi High Court alleged cheating, fraud, corruption and laundering of bank loans by top personnel of Amtek Auto in cohorts with employees of several banks.
– The complaint seeks a criminal investigation against Amtek Auto’s promoter Arvind Dham, 27 company employees, the Resolution Professional (RP) Dinkar Venkatsubramanian, partner Vivek Aggarwal, even Ernst & Young (EY), for preparing a forensic audit report of Amtek Auto’s transactions, and a few IDBI Bank officials.
– It is estimated that the Amtek group of companies owes over Rs 25,000 crore to the banks with the fraud allegedly dating back to over 10 years, thus the overall borrowings of Amtek group are higher than ABG Shipyard.
– It is also alleged that the RP Dinkar Venkatasubramanian along with the management and past promoters, wrote off over Rs. 7,000 crores of fixed assets from a back date, which raises the question if these assets were there in the first place.
– This March, it was reported that the corporate affairs ministry was seeking recovery of Rs 2,320 crore from the promoters of the group which is minisicule considering the total borrowings of the Amtek Group
– While the whistle blower complaint will surely bring some facts out. The ministry also asked the Serious Fraud and Investigations Office (SFIO) to probe the loan defaulting in detail. Only a professionally done comprehensive forensic audit and enquiry into all the group companies and web of transactions between them would bring out the real money trail.
Bhushan Power and Steel
This March, The Serious Fraud Investigation Office (SFIO) told a Delhi court that Aarti Singal, the vice-chairperson of Bhushan Power & Steel Ltd (BPSL), along with her husband Sanjay Singal had allegedly siphoned off funds worth crores from banks to buy residential properties in Mumbai and Delhi.
The sum in question? Rs 5,500 crore. The SFIO also arrested her but she got bail within days. BPSL in the meanwhile continues to stare at a liability of Rs 37,000 crore towards banks and multiple financial institutions.
– Punjab National Bank declared accounts of Bhushan Power & Steel Limited as non-performing asset (NPA) on December 31, 2015.
– In 2018, a Central Bureau of Investigation FIR was filed with the claim that Bhushan Power & Steel Ltd had availed credit facilities from 33 different banks including financial institutions.
-The outstanding defaulted amount as on January 30, 2018 was Rs 47,204 crore. The FIR also alleged that Bhushan Power & Steel Limited deliberately defaulted in repayment of loan amounts to lender banks.
– In 2019, the ED initiated a money-laundering investigation on the basis of the FIR filed by the CBI.
– The ED added that the bank funds were misused and forgery committed through falsified documents and accounts causing loss to banks, financial institutions and the government exchequer.
– In March 2021, JSW Steel acquired BPSL after a bankruptcy resolution process but agencies like the SFIO, CBI and the Enforcement Directorate continued their investigation over alleged irregularities.
– SFIO noted that Aarti Singal, the director of BPSL between 2006 and 2019 and also a co-signatory with her husband in the company’s primary and associated bank accounts, was part of “all the fraudulent activities undertaken by the company.”
– The agency added that BPSL allegedly diverted funds to paper companies to buy assets for the family. A staggering Rs 1,084.93 crore were allegedly availed of by the Singals between 2009 and 2017.