SEBI bars 12 DHFL promoters from accessing securities for violating norms

Markets regulator SEBI on 22 September restrained twelve promoters of Dewan Housing Finance Ltd. (DHFL) from accessing securities market for violating market norms.

Observing that the violations are very grave in nature and the amount involved in the fraudulent transactions is of a very high magnitude, SEBI passed an interim order against the DHFL promoters.

The promoters – Kapil Wadhawan, Dheeraj Wadhawan, Rakesh Kumar Wadhawan, Sarang Wadhawan, Aruna Wadhawan, Malti Wadhawan, Anu S Wadhawan, Pooja D Wadhawan, Wadhawan Holding Pvt Ltd, Wadhawan Consolidated Holding Pvt. Ltd., Wadhawan Retail Venture Pvt. Ltd. and Wadhawan Global Capital Ltd. (formerly known as Wadhawan Housing Pvt. Ltd.) – have also been restrained from associating themselves as Directors or Promoters of any listed public company or associating with any intermediary registered with SEBI.

In November 2019, the Reserve Bank of India had filed an application to initiate Corporate Insolvency Resolution Process (CIRP) against DHFL, and was admitted by the National Company Law Tribunal (NCLT), Mumbai Bench. A transaction auditor was also appointed in order to ascertain any fraudulent transactions.

The firm raised Rs. 24,000 crore through public issue of debt securities during 2007-2019 when the transaction auditor raised serious concerns over authenticity and reliability of DHFL's financial statements for the said period.

SEBI noted that DHFL has entered into certain fraudulent transactions, which were shown as bonafide transactions in its published financial statements as well as corporate announcements disseminated in the public domain.

According to SEBI, the promoters of the company have, prima-facie, defrauded the investors in securities of DHFL by indulging in such fraudulent transactions. The regulator added that the investors who invested in debt securities issued by the company and those who dealt with the firm's equity shares were induced into these transactions based on the untrue information disseminated by the company.

Kapil Wadhawan and Rakesh Wadhawan, being the Chairman and Managing Director of the firm for the past several years, were responsible for ensuring the integrity of DHFL's accounting and financial reporting systems, but it appears that they failed to do so, SEBI noted.

According to the prima facie findings, the promoters violated several market norms.

The entities can file their replies with the regulator within 21 days from the date of receipt of the interim order-cum-show cause notice, failing which the order of restraint from the securities market will stand confirmed against them automatically without any further orders, it added.