Markets regulator SEBI has banned Dewan Housing Finance Corp Ltd’s former CMD Kapil Wadhawan, ex-director Dheeraj Wadhawan, and four others from the securities markets for up to five years and imposed a penalty totalling ₹120 crore on them for diverting funds and fabricating books.
Additionally, they have been restrained from holding any key position in a listed company for up to five years.
Apart from Kapil and Dheeraj, restraints have been imposed on Rakesh Wadhawan, who was non-executive chairman, Sarang Wadhawan, a former non-executive director, Harshil Mehta, who was joint managing director and CEO, and Santosh Sharma, a former CFO.
Also, the Wadhawans were the promoters of the housing finance company.
In its 181-page order passed on Tuesday, SEBI noted that since 2006, DHFL, along with its promoters, directors, and key managerial personnel, have engaged and participated in an “egregiously fraudulent scheme” to divert funds to “Bandra Book Entities” (BBEs) linked to the promoters. By March 31, 2019, DHFL’s loans to BBEs stood at ₹14,040.50 crore.
The BBEs were directly or indirectly connected to Kapil, Dheeraj Rakesh and Sarang, it added.
As per the order, promoters issued huge unsecured loans to these entities despite their lack of assets or business, bypassing all due diligence, and falsely recording them as retail housing loans.
The regulator found that the fraud operated in several steps.First, large unsecured loans were extended to these BBEs even though they had no net worth, assets, or cash flows to justify such exposure. Second, all standard loan appraisal processes were deliberately bypassed.
Third, these weak intercorporate loans to related parties were misrepresented as retail housing loans, creating a false impression of the company’s financial health for investors and other stakeholders.
“To effect this elaborate deception, a fake virtual branch (‘Bandra branch’) and previously closed retail loan accounts were employed, alongside three different accounting software, camouflaging the BBE loans as retail housing loans. In the initial years, well over 30 per cent of all loans of DHFL were to these BBEs,” SEBI noted.
Despite the BBEs not making interest or principal payments, DHFL booked fictitious interest income, which allowed it to show increasing profits instead of losses between FY 2007-08 and FY 2015-16. These financials misled shareholders and distorted DHFL’s share price.
According to SEBI, the main orchestrators of the fraudulent scheme were Kapil and his brother Dheeraj. Further, Rakesh and Sarang Wadhawan were also involved through their roles on DHFL’s board.
The investigation found that loans worth ₹5,662.44 crore were disbursed to 39 BBEs, of which 40% was subsequently routed to 48 other entities connected to the promoters.
Accordingly, SEBI has prohibited Kapil and Dheeraj from the securities markets for five years; while Rakesh and Sarang face a four-year ban; and Mehta and Sharma have been prohibited for three years.
During these periods, they cannot access the securities market, deal in securities in any manner, or hold any role such as director or key managerial personnel in listed companies, registered intermediaries, or public companies intending to raise funds from the market.
Kapil and Dheeraj have each been fined ₹27 crore, while Rakesh and Sarang face penalties of ₹20.75 crore each. Mehta has been ₹11.75 crore, and Sharma faces a total penalty of ₹12.75 crore.
In September 2020, the regulator passed an interim order and imposed several restrictions on them.
Published – August 13, 2025 03:15 pm IST
