PMC Bank case: HDIL directors remanded in police custody till October 9

Housing Development Infrastructure Limited’s (HDIL) directors Rakesh Kumar Wadhawan and his son Sarang Wadhawan played “active roles in commission of offence” and

Housing Development Infrastructure Limited’s (HDIL) directors Rakesh Kumar Wadhawan and his son Sarang Wadhawan played “active roles in commission of offence” and “appear to be real players of the functioning of all group companies”, stated the Economic Offences Wing (EOW) before a court on Friday while seeking police custody for the Wadhawans. Arrested for their involvement in the Punjab and Maharashtra Co-operative (PMC) Bank case, the duo was remanded in police custody till October 9.

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The EOW stated that custodial interrogation was necessary in order to trace the operations carried out by the Wadhawans with borrowings from PMC Bank. “Interrogation of the duo is necessary to get in-depth details of businesses of the group companies,” stated the remand report. It added that documents and material evidence pointed to the duo being key players in all HDIL companies. The police also stated that PMC Bank has lent multiple credit facilities to the HDIL group of companies.

“Initially it appears that the funds availed by HDIL from PMC Bank have not been utilised for designate purposes of borrowings. Initial scrutiny of financial statements indicated diversions and misappropriation of funds in larger amounts,” said the remand report. Besides PMC Bank, HDIL companies have borrowed funds from other groups too. It is therefore necessary to interrogate both the accused to find out whether funds from PMC Bank have been utilised to service debts to other banks.

A senior EOW officer stated that prima-facie, it seems there was “ever-greening of loan”, which is a term for banks propping up ailing companies with fresh loans even as the firms struggle to repay old debts.

The EOW further told the court that false records had been submitted to the Reserve Bank of India (RBI) and that “to find of similar fraud has bene played with any other institution,” the Wadhawans needed to be kept in police custody. The agency stated that banks hold large funds of depositors of various classes – including daily wagers and local cooperative banks – and the fraud has affected all these deposits.

Representing the Wadhawans, advocate Amit Desai said his clients want to repay the money and argued that custodial investigation would hamper the liquidation process. “There are 40 land parcels lying with the bank and the money is secured. Further, fixed deposits worth ₹158 crore were also processed,” said Desai, arguing against custodial investigation. “The books of accounts, records and documents are all available. This isn’t a terrorism case,” he argued. Desai told the court that the history of the group was always to repay the loans. “Is custodial interrogation important or paying depositors’ due important?’ said Desai, adding, “The attached properties will be embroiled in litigation and delay the process. They have made it sure that there is enough liquidity.” Desai further stated that Wadhawans had showed the loans in their books and there was no conspiracy.