Dewan Housing Finance Limited (DHFL) is currently undergoing insolvency resolution process at the National Company Law Tribunal, NCLT, Mumbai branch. The RBI-appointed administrator of DHFL is R Subramaniakumar and he has now ordered three separate audits to be conducted at the troubled housing finance company. All three will be carried out by the same audit firm Grant Thornton. Once the three audits are completed, the reports will be submitted to the lenders of DHFL.
The three transaction audits are as follows: The first one will be to check if there were preferential undervalued transactions to detect if the then DHFL management had an intent to defraud. The second audit will cover a three-year period and is aimed at reviewing the transactions carried out with specific entities. The three-year period will be worked backwards from the date DHFL was turned over to the NCLT.
The third transaction audit to be done by Grant Thornton will focus on finding out the fraudulent transactions and details of irregular accounts. The auditors will make a detailed study of the documents, particularly the securities DHFL had deposited with the lenders to check and report on their enforceability.
Among the lenders, the ones most worried are probably State Bank of India, Union Bank of India and IndusInd Bank since they were the ones to detect that DHFL was indulging in frauds which ultimately led to the company being referred to the NCLT.
At the heart of the irregularities detected are loans and advances sanctioned to 65 entities totalling ₹24,594 crore. These transactions were not backed by proper documentation. Many of these had very little to show by way of operations in their accounts.
There is another parallel investigation going on where the Serious Frauds Investigations Office is checking on diversion of funds by DHFL. The company has been served notices by the SEBI and NHB on various counts.