The transaction auditors appointed by the administrator of Dewan Housing Finance Limited (DHFL) to investigate the affairs of the company has found in its initial report that certain transactions were fraudulent in nature.

According the report, the monetary impact of the fraudulent transaction in the books of the company is to the tune of Rs 14,046 crore and the notional loss is around Rs 3,348 crore, due to fraudulently charging lower rate of interest to certain entities.

“The total impact of such transactions as detailed in the transaction auditor’s report has been sought from the relevant entities involved, along with the interest for the relevant period, through the said application filed with the Hon’ble NCLT”, the company said in an exchange notification.

The administrator of DHFL – R Subramaniakumar – has moved an application in the National Company Law Tribunal (NCLT) based on the findings of the of transaction auditor. The application was moved under Section 60(5) and Section 66 of the Insolvency and Bankruptcy Code (IBC) on August 30, 2020 against the erstwhile promoters of the company – Kapil and Dheeraj Wadhawan and 85 other entities and people that include Township Developers India Ltd, Wadhawan Holdings Private Limited, Dheeraj Township Developers Private Limited, Wadhawan Consolidated Holdings Pvt. Ltd., Wadhawan Global Hotels & Resorts Pvt. Ltd, Wadhawan Lifestyle Retail Pvt. Ltd. and certain other entities.

“Basis the investigation and observations of the transaction auditor, the administrator has filed an application in respect of disbursements made to certain entities, referred to as the Bandra Books Entities, before the Mumbai bench of NCLT," read an exchange notification by the company.

According to the report prepared by the transaction auditor, the concerned fraudulent transactions occurred during financial year 2006-2007 to 2018-19.

The administrator had appointed professional agency Grant Thornton to probe the affairs of the company.

DHFL is the first financial services company to be admitted under IBC. The mortgage lender reported a pre-tax profit of Rs 92.81 crore in the quarter ending June 2020 (Q1FY21) compared to a loss of Rs 198.85 crore in the same period of the last financial year. Its net for the period came in at Rs 70 crore, compared to a loss of Rs 206 crore. Its total income for the period stood at Rs 2,328.86 crore (Q1FY21), compared to Rs 2,399.87 crore in Q1FY20. It said that almost 28 per cent of its book was under moratorium as of June 30.

The auditors of the company said in their notes that the company had accumulated losses exceeding the share capital and reserves and its net worth had been fully eroded and it was now under Corporate Insolvency Resolution Process (CIRP).