Yes Bank case: Court drops laundering charges against DHFL

The special PMLA (Prevention of Money Laundering Act) court has held that the company cannot be proceeded against after undergoing insolvency and being taken over by a new management

MUMBAI: In a significant development in the Yes Bank money laundering case involving its former managing director and CEO, Rana Kapoor, a special court has discharged Dewan Housing Finance Corporation Limited (DHFL) from the prosecution.

Rana Kapoor, founder of Yes Bank (HT Photo)

The special PMLA (Prevention of Money Laundering Act) court has held that the company cannot be proceeded against after undergoing insolvency and being taken over by a new management.

The order was passed while allowing a discharge application filed by DHFL in a PMLA case arising out of an enforcement case information report (ECIR) registered by the Enforcement Directorate (ED). The court noted that DHFL had undergone a corporate insolvency resolution process under the Insolvency and Bankruptcy Code (IBC), pursuant to which a resolution plan was approved by the National Company Law Tribunal (NCLT), resulting in a complete change in the company’s ownership and control.

Relying on the statutory protection available to a resolved corporate debtor, the court held that once the insolvency resolution process is completed and management is transferred to a successful resolution applicant, the corporate debtor cannot be subjected to criminal prosecution for offences committed prior to the resolution. On this basis, the court discharged DHFL from the PMLA case as well as from the ECIR to the extent that it related to the company.

The ED’s case traces its origin to alleged irregularities during Kapoor’s tenure at Yes Bank, when the bank invested around ₹3,700 crore in short-term debentures issued by DHFL in 2018. According to the agency, these investments were followed by DHFL allegedly extending a ₹600-crore loan to a company linked to Kapoor’s family, which the ED has characterised as kickbacks granted in return for the Yes Bank funding. Investigating agencies have alleged that the transactions formed part of proceeds of crime estimated to exceed ₹5,000 crore.

The prosecution claims the funds were routed through multiple entities and layered in a manner intended to project them as untainted, thereby attracting offences under the money laundering law. DHFL was arrayed as an accused on the allegation that it was a key participant in the transaction chain that facilitated the alleged diversion and laundering of funds.

While granting relief to DHFL, the court made it clear that the discharge flows from the legal consequences of the insolvency resolution and does not amount to an adjudication on the merits of the allegations. The order does not exonerate any individual accused, and proceedings against Kapoor and other persons named in the case will continue independently.