Mumbai: The Economic Offences Wing (EOW) of the Mumbai Police on Thursday arrested two directors of the Housing Development and Infrastructure Limited (HDIL) — Rakesh Wadhawan and his son Sarang Wadhawan — in connection with the Rs 4,355-crore fraud at the Punjab and Maharashtra Cooperative (PMC) Bank.
According to the police, properties worth several thousand crores have also been frozen by the EOW in connection with the case.
Rakesh Wadhawan is the executive chairman of HDIL and Sarang is the managing director.
An FIR was filed three days back against the Wadhwans, PMC Managing Director Joy Thomas and erstwhile chairman Waryam Singh apart from various realty companies through which funds were allegedly diverted.
The arrested accused have been charged under various sections of the Indian Penal Code (IPC) including cheating, criminal conspiracy and criminal breach of trust. The duo will be produced before a metropolitan magistrate court on Friday.
“We have arrested the directors of HDIL and they are being questioned. Maximum custody will be sought when they are being produced tomorrow before a court,” said EOW chief Rajvardhan Sinha.
Mumbai Police Public Relations Officer Pranay Ashok said that both directors were called for inquiry today. "We did not receive sufficient and satisfactory answers from them, so we arrested them. Their specific role is cheating. Their role in this case was found to be sufficient grounds for arrest. We have also identified HDIL shares worth Rs 100 crore and an investigation will be carried out. Forty-four bank accounts have also been identified.”
The move came a few days after the government issued a look-out circular against the two directors after preliminary findings allegedly revealed financial irregularities at HDIL. A look out circular is issued against a person directing the immigration authorities to ensure that he or she does not leave India through an airport or seaport.
As per a PMC branch manager who filed the complaint on the instruction of an RBI-appointed administrator, between 2008 and 2019 certain loans that had become non-performing assets were declared performing assets by the bank, causing loss worth several crores to the RBI. The bank intentionally hid the information from the RBI.
According to the complaint, HDIL was the main defaulter of the loans and despite non-payment, a fake loan record was created by the bank in collusion with HDIL.
Last week, the RBI imposed restrictions on withdrawal of deposits from the bank in light of the scam causing inconvenience to several account holders of PMC.
Crisis-hit HDIL had said that loans taken from banks, including PMC Bank, were in normal course of business after providing adequate security cover and that it is ready to discuss with the bank to protect the interest of depositors.
PMC's exposure to HDIL group is nearly 73% of its total loan book size of Rs 8,880 crore as of September 19, 2019, a source had earlier said. In an alleged confession letter to the RBI, the bank's suspended managing director Joy Thomas had accepted giving loans to realty developer HDIL and its related entity to the tune of Rs 6,500 crore without informing all the board members.
Currently, HDIL is developing various projects at Kurla, Nahur, Mulund and Palghar and has a residential portfolio of 86.22 lakh sq ft under construction.
It has a land reserve of around 193 million sq ft as on March 31, 2019, with 90 per cent of its land reserves in Mumbai Metropolitan Region, as per the 2018-19 annual report. Incorporated in 1996, Mumbai-based HDIL mainly focused on real estate development in the Mumbai Metropolitan Region, which included clearing slum land and rehabilitating slum dwellers.
The main source of revenue of HDIL, for long, has been selling of development rights to other property developers, after developing the slum land. The company reported revenue of Rs 601.20 crore in FY19 and a net profit of Rs 96.19 crore.
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