Car designer Dilip Chhabria siphoned ₹18 cr: ED

A special court in Mumbai has taken cognizance of charges filed by the Enforcement Directorate (ED) against car designer Dilip Chhabria and his family members. The chargesheet reveals that ₹18.13 crore ($2.4 million) of illegitimate funds were acquired between January 2016 and September 2018. The ED alleges that Chhabria used fraudulent means to obtain financing from BMW Finance and diverted profits to sister concerns, causing financial strain on his company. The case came to light after comedian Kapil Sharma accused Chhabria of cheating him of ₹5.3 crore ($716,000).

MUMBAI: A special PMLA (Prevention of Money Laundering Act) court on Wednesday took cognizance of the chargesheet filed by the Enforcement Directorate (ED), which is investigating a money laundering case against car designer Dilip Chhabria and his family members, revealed that the total illegitimate funds acquired through wrongful means between January 2016 to September 2018 were ₹18.13 crore.

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Chhabria had manufactured 127 DC-Avanti cars from 2018-2021, of which the firm had sold 120 in India, including some Bollywood personalities and sportsmen.

The ED in its chargesheet against Dilip Chhabria, his sister Kanchan Chhabria, three companies associated with them, and two others associated with the company, outlined the modus operandi which stated that the company (DCDPL) would obtain finance from M/s BMW Finance in the name of DC Avanti Car (just by providing Engine no and/or Chassis no) or by showing the same as ‘Demo Car’ i.e. without any registration or temporary registration documents. Subsequently, the money received from M/s BMW Finance would either be used in making a DC Avanti Car or would be utilised for other business/personal expenses.

If part of the money was utilised in the manufacturing of the DC Avanti Car, the same would be subsequently sold to a customer (with the concealment of information that the same is financed by M/s BMW India Financial Services and hypothecated to BMW India Financial Services), who would again avail financing of the vehicle from other finance institution bank, the chargesheet added.

Since the Registration Certificate of the manufactured car was never submitted to M/s BMW Finance, the CERSAl system would allow hypothecation of the vehicle in the name of the refinancing institution.

In case where disbursed loan amount against DC Avanti Car by BMW India Financial Services was not utilised for the intended purpose, the same was utilised for business/personal expenses. Later, when the issue of supplying a Registration Certificate was raised by M/s BMW India Financial Services, then a dummy invoice was issued in the name of the Gurgaon Branch/Unit of M/s DCDPL from M/s DCDPL, Pune and the Avanti Car would be illegitimately registered, based on invoice details & other documents, often without any physical inspection.

The ED further detailed a grand scheme of deception through its chargesheet that not only misled customers and creditors but also disadvantaged other shareholders of M/s Dilip Chhabria Design Pvt Ltd (DCDPL). The chargesheet asserts that Chabbria diverted significant profit-generating projects of DCDPL to its sister concerns, namely DC Motor Works and DC Autosoft, to the detriment of DCDPL’s interests, ultimately leading to the company’s insolvency proceedings in 2019.

These sister concerns, operated by the Chhabria family, reaped substantial benefits from the diverted projects, while DCDPL suffered. Transactions disguised as dummy stock sales and salary payments were employed as part of this scheme. Furthermore, instances were noted where DCDPL’s resources were utilised for the operations of the sister concerns, exacerbating the financial strain on DCDPL.

The chargesheet stated that Syed Khuram, the chief financial officer of DCDPL had agreed to the misappropriation of funds in DCDPL due to the malpractices adopted by the management and Chhabria’s family members. He also enunciated details of instances of mismanagement during the manufacturing and sale of the DC Avanti Car by the Chabbria family, causing huge losses to the company and amounting to personal gain to the Chhabria family.

“The in-house manufactured DC Avanti car was shown as sold at a loss to multiple dealers and in turn, cash or other monetary personal benefits were enjoyed by Chhabria and his family. Details of multiple registrations of DC Avanti Cars, as carried out by one M/s JSR Cars, to obtain loans from various financial instruments in the guise of manufacturing demo DC Avanti cars. However, the loan was never utilized for the intended purpose and was transferred to personal accounts of Bonito Chhabria, Nihal Bajaj and were used for personal expenses of the Chhabria family,” he said during the investigation.

Despite the company’s insolvency, malpractices persisted with the complicity of the Chhabria family and insolvency resolution professional Jitendra Kumar Yadav, another accused in the case. Yadav, along with Dilip, did not allow for the movement of vehicles in favour of the rightful owner and with mala fide intention of extracting monetary benefits from customers (around ₹50,000 per vehicle), forced customers to accept their vehicle without any customization even after paying part/full amount to DCDPL. Yadav allegedly received approximately ₹40 lakh from these illicit arrangements.

The ED said that Dilip Chabria had admitted raising invoices to DCDPL for ₹3 lakh a month, towards rental payments against the required payment of ₹30,000 a month to the actual owner of the premises, misusing his position of being Managing Director of the company and by same, siphoning of funds from DCDPL in the guise of exuberantly hiked salary, 2016 onwards (increase of 777.67% in salary from FY 2014-15 to FY 2018-19) as well as in form of exceptional hiked rental receipts from DCDPL (from ₹3.6 lakh per annum in FY 2017-18 to ₹36 lakh per annum from 2018 onwards).

The case came to light after popular comedian Kapil Sharma alleged that Dilip Chhabaria had cheated him of ₹5.3 crore. He stated that he had approached Chhabria to design a vanity van in 2017 and paid ₹5.30 crore to him between May 2017 and May 2018, but when he found that there was no progress on his order, he approached Dilip Chhabria in July 2018.

Dilip Chhabria allegedly demanded ₹40 lakh more as GST (goods and service tax) and Sharma paid the amount in July 2018. However, after a few months, there was still no development on the van. Sharma then asked for his money back. Dilip Chhabria then said he would deliver the van but asked for an additional ₹60 lakh. Sharma then approached the National Company Law Tribunal (NCLT) in 2019, following which NCLT froze Dilip Chhabria’s account.

However, Dilip Chhabria then sent Sharma a bill of around ₹12 lakh for parking the vehicle and keeping spare parts in the factory premises. After receiving the bill, Sharma approached Mumbai Police’s Economic Offences Wing (EOW) and registered a complaint. Sharma also approached CIU and his statement was recorded and an FIR was registered under sections 420 (Cheating and dishonestly inducing delivery of property), 409 (Criminal breach of trust by a public servant, or by banker, merchant or agent), and 120 (b) (criminal conspiracy) and 34 (common intention) of the Indian Penal Code against Dilip Chhabria, his son Bonito and others.

The chargesheet revealed that a major portion of the amount received from Sharma (complainant), for designing of vanity van as per his customizations and requisitions, was utilized for the repayment of loans on behalf of DCDPL to Axis Bank, BMW Finance, Volkswagen Finance, and Yes Bank to the tune of Rs. 1.11 Crore. While ₹1.08 crore was also used for personal expenses by the family, ₹61.78 crore was used to give salaries to the staff of DCDPL.