Private jets to trusts: How Deccan Chronicle promoters cheated banks

Hyderabad: Sleuths of Enforcement Directorate arrested T Venkattram Reddy, PK Iyer [Promoters & ex-Directors of M/s Deccan Chronicle Holdings Limited (DCHL)] and Mani Oommen [statutory auditor of DCHL] in a bank fraud case under the Prevention of Money Laundering Act (PMLA), 2002.

ED began probe under money laundering on the basis of multiple FIRs registered by CBI Bengaluru and Telangana Police for criminal conspiracy, cheating and forgery by M/s DCHL, its promoter, directors & others.

The investigation revealed that T. Venkattram Reddy, Chairman of M/s DCHL, along with the other promoters/directors, in connivance with the statutory auditor, defrauded the banks and NBFCs.

Background:

DCHL availed 111 credit facilities from 16 public sector and private banks to the tune of Rs. 9,805 Crore on the pretext of working capital / business expansion requirements.

However, these loans were taken by DCHL on the basis of fabricated books of accounts and the company did not disclose its correct loan liabilities to the banks. DCHL and their promoters/directors understated the financial charges and overstated advertising revenues to consistently defraud the banks for obtaining new loans.

Fraud:

The loan funds were diverted and siphoned off by the promoters of the company in several ways and for various purposes, including:

i. Diversion of new loans for repayment of existing loans. In complete violation of the loan terms & conditions, M/s DCHL utilized 73% of the loan amounts only for the cyclical repayment of existing loans. Eventually, the loans turned intonon-performing assets and M/s DCHL defaulted on principal loans of around Rs. 3,000 Crore and caused a total loss of Rs. 8,180 Crore to the banks and other financial creditors.

ii. Diversion of funds to their subsidiaries & associated entities including investment in Indian Premier League (IPL).

iii. Purchase of a private aircraft by T Venkattram Reddy and purchase of a fleet of high-end cars worth more than Rs. 30 Crore by P. K. Iyer.

iv. Payments to charitable trusts which were withdrawn and illegally returned back to the promoters of M/s DCHL in cash.

v. Declaring and distributing dividends by showing fictitious profits. The promoters, who were holding up to two-thirds of the shareholding in the company, pocketed an amount of around Rs. 143 Crore among themselves.

vi. Diversion of Rs. 253 Crore for buy-back of shares with an intent to bolster the stock prices and to project a financially rosy picture.

Earlier, ED had attached movable/immovable properties of M/s DCHL and its promoters/directors amounting to Rs. 386.17 Crore in this case. According to ED, the attached assets include 14 properties located in New Delhi, Hyderabad, Gurgaon, Chennai, Bangalore.

Investigation conducted under the PMLA revealed that they hatched a well-planned conspiracy and manipulated the balance sheets of the company inflating the profits, advertisement revenue and grossly under-stated the financial liabilities of the company to paint a rosy picture for years to cheat the banks and its shareholders. Balance sheets of the company were fudged and loans taken from one bank were hidden from other financial institutions.