ED arrests 2 promoters, auditor of Deccan Chronicle Holdings Limited in bank fraud-linked money-laundering case

The Enforcement Directorate (ED) arrested two promoters and an auditor of Deccan Chronicle Holdings Limited (DCHL) on Wednesday as part of a money-laundering investigation linked to a bank fraud case.

Those arrested under the provisions of the Prevention of Money Laundering Act (PMLA) include T Venkattram Reddy and P K Iyer, promoters and former directors of DCHL, and Mani Oommen, the statutory auditor of the company.

In a statement, the federal agency said it initiated the money-laundering probe on the basis of multiple FIRs registered by the Central Bureau of Investigation (CBI) and Telangana Police for criminal conspiracy, cheating and forgery by DCHL, its promoters, directors and others, apart from a prosecution complaint filed by the Securities and Exchange Board of India (SEBI) against the firm and others.

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The PMLA investigation found that Reddy, the former chairman of DCHL, along with other promoters and directors, "in connivance" with the statutory auditor, defrauded banks and NBFCs, the ED said.

"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," the agency alleged.

It said the loan funds were "diverted and siphoned off" by the promoters of the company in several ways and for various purposes.

"In complete violation of the loan terms and conditions, DCHL utilised 73 per cent of the loan amounts only for the cyclical repayment of existing loans. Eventually, the loans turned into non-performing assets and 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," the ED said.

It added that it found diversion of funds to the subsidiaries of the company's associated entities, including investment in the Indian Premier League (IPL).

It flagged the purchase of a private aircraft by Reddy and the purchase of a fleet of high-end cars worth more than Rs 30 crore by Iyer.

Payments to charitable trusts, which were withdrawn and illegally returned to the promoters of DCHL "in cash", were detected, the ED said.

A particular instance of "declaring and distributing" dividends by showing fictitious profits was found and 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, the agency alleged.

An alleged instance of diversion of Rs 253 crore for buy-back of shares with an intent to bolster the stock prices and project a financially rosy picture was also found, the ED said.

The agency filed the PMLA case against the firm and its promoters in 2015.