Cobrapost claims Rs 31,000-crore financial fraud, including illegal donations to the BJP

29 January 2019
On 29 January 2019, Aniruddha Bahal, the editor of Cobrapost, addressed a press conference in Delhi to share the findings of the publication’s latest report, titled, “The anatomy of India’s biggest scam.”
Shahid Tantray for The Caravan
On 29 January 2019, Aniruddha Bahal, the editor of Cobrapost, addressed a press conference in Delhi to share the findings of the publication’s latest report, titled, “The anatomy of India’s biggest scam.”
Shahid Tantray for The Caravan

A group of real estate companies linked to Dewan Housing Finance Corporation Limited, or DHFCL, a Mumbai-based company, have been making conspicuously hefty donations to the Bharatiya Janata Party, a report published by the investigative-news website Cobrapost has alleged. The report alleges that companies associated with the DHFCL—such as RKW Developers, Skill Realtors and Darshana Developers—are “shell companies and dubious firms” engaged in financial fraud to the tune of Rs 31,000 crore. The Cobrapost investigation also claims that between 2014 and 2017, these three companies illegally donated around Rs 20 crore to the BJP. On 29 January, Cobrapost held a press conference in Delhi to share the findings of their latest report, titled, “The anatomy of India’s biggest scam.” The publication’s editor Aniruddha Bahal, the former BJP leader Yashwant Sinha, the journalists Josy Joseph and Paranjoy Guha Thakurta, and the advocate Prashant Bhushan spoke at the press meet.

The DHFCL is a publicly listed non-banking finance company owned by Wadhawan Global Capital, a conglomerate holding company that manages a portfolio of businesses, including asset management, lending, and housing finance. According to the Cobrapost report, the promoters of the DHFCL allegedly borrowed thousands of crore in loans from public and private sector banks to grant unsecured credit, in violation of financial regulations, to shell companies owned by the Wadhawan Group. The report claims that the DHFCL released over Rs 10,000 crore to companies controlled by the Wadhawan Group. In turn, the report alleges, these companies then used the money to acquire shares, equity and other private assets in India and other countries such as United Kingdom, United Arab Emirates, Sri Lanka and Mauritius.

The Cobrapost report alleged that a web of companies interlinked with the DHFCL and the Wadhawan Group are involved in the network of financial fraud. According to the Cobrapost report, the DHFCL raised funds by borrowing a sum of Rs 96,880 crore from public and private sector banks—including foreign banks—and financial institutions. This includes a loan of Rs 11,500 crore from the State Bank of India and another of Rs 5,000 crore from the Bank of Baroda. In addition, it also raised Rs 9,225 crore from public deposits—unsecured deposits that companies invite from the public to finance itself. Of the total amount of Rs 106,105 crore, Cobrapost reported that the company loaned out Rs 84,892 crore, or 80 percent—primarily to its own shell companies.

Further, the report claims, Placid Noronha and Bhagwat Sharma, two promoters of the DHFCL, are also listed as promoters of RKW Developers. The primary promoters of the DHFCL are Kapil Wadhawan, Aruna Wadhawan and Dheeraj Wadhawan—Noronha and Dheeraj also serve as directors of both RKW Developers and Darshan Developers.

The Cobrapost investigation also states that, according to BJP’s declarations to the Election Commission of India, RKW, Darshan, and Skill Realtors have donated a combined total of approximately Rs 20 crore to the BJP during the financial years 2014–17, which would be in violation of Section 182 of the Companies Act, 2013. Section 182 deals with prohibitions and restrictions on political contributions by companies, and states that a company can contribute only up to 7.5 percent of the average net profit it earned during the three preceding financial years. But the Cobrapost report shows that RKW Developers contributed Rs 10 crore to the BJP in the financial year 2014–15, despite incurring a loss of around Rs 25 lakh in the financial year 2012–13 and an average net profit of around Rs 18 lakh in the preceding three years.

Nileena MS is a reporting fellow with The Caravan. 

Keywords: Cobrapost shell companies financial mismanagement Bharatiya Janata Party Dewan Housing Finance Corporation Limited Donation
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