DHFL has no connection with shell companies named in Cobrapost investigation, says report

Dewan Housing Finance Corp Ltd (DHFL) has not promoted any of the 26 shell companies, which were alleged to have siphoned off about Rs 35,000 crore of the company by investigative news portal Cobrapost, an independent review report released by DHFL said.

"There is no evidence of DHFL forming shell companies to divert funds, promoters hiding shareholding in any companies and insider trading", said a report by chartered accountant firm TP Ostwal & Associates.

The report added that monitoring related to 15 borrowers, who offered loans amounting to Rs 7,485 crore, is inadequate, and there were certain instances of non-adherence in loans having major risk implications.

The detailed report comes following a January 30 allegation by Cobrapost that accused DHFL promoters of committing financial fraud by creating shell companies.

As many as 32 Indian and foreign banks lent Rs 97,000 crore to DHFL Group companies with many borrower companies having the same addresses, directors and auditors, alleged the news portal earlier this year.

DHFL’s audit committee in its meeting on January 31 had appointed chartered accountant firm TP Ostwal & Associates as an independent expert to carry out an in-depth review and independently verify data relating to allegations made by Cobrapost.

The TP Ostwal report on Wednesday refuted Cobrapost claims and said there was no merit in allegations that Rs 14,282 crore loans were sanctioned to 45 borrowers, which are alleged to be part of Sahana Group/Wadhawan Group.

"Loans were disbursed to only 10 of the alleged 45 companies, totalling Rs 4,715 crore — of which Rs 1,640 crore were repaid by borrowers up to December 2018," read the TP Ostwal report.

TP Ostwal & Associates LLP also found Cobrapost’s allegations baseless and without merit. “No evidence was found to corroborate or support allegations of tax fraud,” it added.

The Mumbai-based chartered accountant firm also alleged that DHFL does not have any directors in common, including promoters, with any of the alleged ‘shell’ companies. "The company or its promoters also do not have any shareholding In these entities", it said.

The report, however, identified lapses related to standard operating procedures and policies laid out by the company, pointing to a deficiency in the adherence with the policies.