Page 14 - Banking Finance October 2020

ROUNDUP

brief, called on everyone to draw "hard cused, including the owner of Rose were used to make the actual disburse-
lessons" from the pandemic, for which Valley, who is still in jail. ments to fictitious entities, which in-
the world was not prepared. "The designated court has given a date cluded several home loan accounts of

in November for hearing on the com- smaller amounts. These fictitious home
Industry wants revamp of plaint, which had been filed by SEBI," loans accounts were randomly picked
up from DHFL'S own database of closed
IBC code he said, adding, the court would also loan accounts.
frame charges against the accused on
For all its promise of redeeming the day of hearing. Then collection distribution code was
stressed companies, the Insolvency used to show funds flow from Bandra
and Bankruptcy Code (IBC) is falling The official said there have been in- Book Entities (Grant Thornton's name
out of favour with the industry, which stances of forging of documents and for fictitious companies) to numerous
has pointed out several roadblocks to cheating by "some unscrupulous ele- other fictitious accounts. The funds
the government. These range from ments who are trying to derail the ses- were wrongly shown as payment of
time-consuming litigation to the threat sion trial".
principal amount from fictitious home
of coercive action post the resolution loan borrowers. These were adjusted
process. In a series of representations DHFL used software to
as principal loan repayments instead of
to the corporate affairs ministry, lead- hide fraud: Probe payment of interest component first.
ing consultancies and law firms have Bankrupt housing finance company Therefore, the "Bandra Book Entities"
suggested a revamp of the IBC post Dewan Housing Finance Corporation portfolio was gradually brought down
the suspension of initiation of corpo- (DHFL) had used different loan account- by showing repayments of principal and
rate insolvency resolution process. ing software to hide fraudulent trans- not the interest amount.
actions from fictitious borrowers, said
Rose Valley returned Rs. the forensic report by Grant Thornton. GST cess to stay 4 more
10,500 cr out of Rs. 17,520 It said the software helped the com-
pany hide the transactions from regu- years
cr to investors: ED lators and auditors and show inflated The GST compensation cess, which
Rose Valley, which is under the concur- income to the stock exchanges. The was applicable until June 2022, is ex-
rent probe of the CBI and ED for alleg- report said the company used Foxpro pected to stay in place for another four
edly defrauding investors, has already software to prepare codes. years to enable states to repay the 1.1
returned around Rs. 10,500 crore out lakh crore loan and interest on it.
Bankrupt housing finance company
of Rs. 17,520 crore raised from them,
Dewan Housing Finance Corporation While the Centre has not officially
an official said .
(DHFL) used different loan accounting commented on how long the cess has
He said the Enforcement Directorate software to hide fraudulent transac- been extended, sources said that
(ED) had also attached properties tions involving fictitious borrowers, said based on current cost it may be in
worth Rs. 4,500 crore and filed two the forensic report prepared by Grant place until 2026. The government has
prosecution complaints with the desig- Thornton. said that the revised tenure will de-
nated Prevention of Money-Launder- It said the software helped the com- pend on multiple factors, including tax
ing Act (PMLA) court. buoyancy as well as the interest rate.
pany hide the transactions from regu-
"Out of Rs. 17,520 crore raised by Rose lators and auditors and show inflated Cess is applicable on cars, soft drinks,
Valley, which has been in operation income to the stock exchanges. tobacco, pan masala and coal.
since 1999, around Rs. 10,500 crore The report said the company used
has already been returned to inves- Oil India begins explora-
Foxpro software to prepare codes for
tors," the ED official said. concealing actual disbursements and tion in Andaman sea
The probe into the Rose Valley scam collection of funds by creating 260,315 Oil India, the nation's second biggest
started six years ago. The official said fictitious home loan accounts. These state-owned oil producer, said it has
the second prosecution complaint is codes then had three components, in- started exploring for oil and gas in the
against all those who have been ac- cluding disbursement distribution, and Andaman sea. OIL said it has begun

14 | 2020 | OCTOBER | BANKING FINANCE