Bank Fraud: Enforcement Directorate arrested Ex-Directors and Statutory Auditor of DCHL in Bank Fraud Case

The Directorate of Enforcement (ED) has arrested T. Venkattram Reddy, P. K. Iyer [Promoters & ex-Directors of M/s Deccan Chronicle Holdings Limited (DCHL)] and Mani Oommen [statutory auditor of DCHL] in a bank fraud case under the Prevention of Money Laundering Act (PMLA), 2002.

The ED launched an inquiry into money laundering based on various FIRs filed by the CBI Bengaluru and Telangana Police for criminal conspiracy, cheating, and forgery by M/s DCHL, its promoter, directors, and others. A prosecution complaint filed by the Securities and Exchange Board of India against M/s DCHL and others was also included in the scope of the PMLA probe.

PMLA investigation revealed that T. Venkattram Reddy, Chairman of M/s DCHL, along with the other promoters/directors, in connivance with the statutory auditor, defrauded the banks and NBFCs. DCHL availed 111 credit facilities from 16 public sector and private banks to the tune of Rs.9,805 Crore on the pretext of working capital / business expansion requirements

However, DCHL made these loans on the basis of fraudulent books of accounts, and the business did not disclose its true loan liabilities to the banks. DCHL and their promoters/directors repeatedly undervalued financial expenses while overstating advertising income in order to deceive banks and get additional loans.

The loan funds were diverted and siphoned off by the promoters of the company in several ways and for various purposes, including:

i. Diversion of new loans for repayment of existing loans. In complete violation of the loan terms & conditions, M/s DCHL utilized 73% of the loan amounts only for the cyclical repayment of existing loans. Eventually, the loans turned into non-performing assets and M/s DCHL defaulted on principal loans of around Rs. 3,000 Crore and caused a total loss of Rs. 8,180 Crore to the banks and other financial creditors.

ii. Diversion of funds to their subsidiaries & associated entities including investment in Indian Premier League (IPL).

iii. Purchase of a private aircraft by T. Venkattram Reddy and purchase of a fleet of high-end cars worth more than Rs.30 Crore by P. K. Iyer.

iv. Payments to charitable trusts which were withdrawn and illegally returned back to the promoters of M/s DCHL in cash.

v. Declaring and distributing dividends by showing fictitious profits. The promoters, who were holding up to two-thirds of the shareholding in the company, pocketed an amount of around Rs.143 Crore among themselves.

vi. Diversion of Rs.253 Crore for buy-back of shares with an intent to bolster the stock prices and to project a financially rosy picture.

Earlier, ED had attached movable/immovable properties of M/s DCHL and its promoters/directors amounting to Rs.386.17 Crore in this case.

Further investigation is in progress.