MUMBAI: The National Financial Reporting Authority (NFRA) has started an audit of Dewan Housing Finance Corp. Ltd (DHFL) and has reached out to the company’s administrator for documents, a person aware of the development said.
According to the person quoted above, the NFRA, an independent regulator for auditors, has sought documents pertaining to DHFL’s statutory audit for FY18. “The documents will be provided after the lockdown and this has been communicated to NFRA,” the person said on condition of anonymity. The Securities and Exchange Board of India (Sebi) has also sought an update on the lender’s transaction audit, he added.
A transaction audit of DHFL by Grant Thornton had indicated instances of “avoidance transactions” by the company.
The report was presented to the administrator on 12 February and the administrator believes certain transactions by the company are related to Sections 43, 45, 50 and 66 of the Insolvency and Bankruptcy Code (IBC).
These sections deal with preferential transactions, undervalued transactions, extortionate (on unfair terms) transactions and fraudulent trading, respectively, and are collectively termed avoidance transactions.
R. Subramaniakumar, a former managing director and chief executive of Indian Overseas Bank, was appointed by the Reserve Bank of India (RBI) as DHFL’s administrator.
A resolution professional orders a transaction audit of a company under Section 25 (2) (j) of the IBC to find if it engaged in certain kinds of forbidden transactions. In a notice to stock exchanges on 6 January, the administrator-managed company said, “the transaction auditor under the scope of work is also required to identify and review irregular borrower accounts from the angle of possible fraud”.
That apart, the person said that about 35% of DHFL’s customers have opted for the three-month moratorium on loan repayments.
“The company has made a team of 1,600 employees from verticals like recovery, credit and sales to sensitize customers on the additional interest payable if they opt for the moratorium,” said the person quoted above, adding that DHFL has launched a campaign whereby each employee has to reach out to 10 borrowers on this issue.
“The variable pay of these employees have been linked to this performance and till date, about 15,000 borrowers have been contacted,” he said.
On 20 November last year, RBI superseded DHFL’s board and later referred the mortgage lender to the National Company Law Tribunal (NCLT).
The central bank had cited governance concerns and payment defaults by DHFL as reasons for superseding the board. DHFL is the first non-bank lender to be referred to NCLT under new rules notified by the government on 15 November.