How Deccan Chronicle promoters made a mockery of the insolvency process

Are unscrupulous promoters of defaulting companies making a mockery of the insolvency regime in the country by indirectly controlling their ‘erstwhile’ companies even after they have been acquired by successful resolution applicants under the insolvency and bankruptcy code? Investigation into Deccan Chronicle Holdings Ltd reveals so.

Investigation by the Enforcement Directorate, the agency that probes money laundering cases, has revealed that despite the initiation of insolvency proceedings against Deccan Chronicle Holdings Ltd (DCHL), the then promoters and their close family members continue to wield indirect control over the print media business and are working in senior capacities drawing large monthly salaries.

ED has seized high-end vehicles which were registered in the name DCHL from their possession. The promoters were also found to be re-purchasing the mortgaged assets at discounted rates through private treaties by using concealed proceeds of crime through front company. The net amount of loss caused to the banks/NBFCs/ Financial Institutions is estimated at Rs 8180 Crore including the unpaid principal loan amount of approximately of Rs 3,000 crore.

Deccan Chronicle Holdings was acquired by SREI Multiple Assets Investment Trust (Vision India Fund) for a sum of Rs 356 crore against total loan default of Rs 8180 crore.

Enforcement Directorate(ED) today provisionally attached immovable assets worth Rs 122 Crore of DCHL and two of its former promoters under the Prevention of Money Laundering Act, 2002 (PMLA) in a loan fraud case.

The two former promoters are T Venkatram Reddy and T Vinayakravi Reddy. The assets attached include 14 properties located in New Delhi, Hyderabad, Gurgaon, Chennai, Bangalore etc. All these attached assets are not covered under the IBC process. This is the second attachment in this case. After this attachment, so far the ED has attached a properties worth Rs 264.56 crore.

Investigations under PMLA were initiated by ED against DCHL and its management in the year 2015, based on six FIRs and corresponding charge sheets filed by CBI, BS & FC, Bangalore. Another charge sheet has been filed by CCS Police and a prosecution has also been filed by SEBI against the company.

Investigation under PMLA revealed that the three promoters of DCHL  — P K Iyer,  T Venkatram Reddy and T Vinayakravi Reddy — hatched a well-planned conspiracy and manipulated the balance sheets of the company inflating the profits-advertisement revenue and grossly under-stated the financial liabilities of the company to paint a rosy picture for years to cheat the banks and its shareholders. Balance Sheets of the company were fudged and loans taken from one Bank were hidden from other financial institutions.

Over the years, DCHL availed credit facilities to the tune of more than Rs 15,000 crore. Money trail investigation revealed that most of the loans were cyclically rotated into group companies and were diverted to pay back older loans. Loans taken for working capital requirements and for business needs of DCHL were diverted to extravagant projects. The diverted funds, which were invested in new projects without the consent of the banks, were ultimately shown as losses. Substantial amounts out of the loans were diverted into subsidiaries which have not done any legitimate business and also into the proprietary concerns of the two ex-promoters without any proper accounting. The promoters ran the public listed company DCHL like their proprietary fiefdom throwing all norms of corporate governance to wind. There were many suspicious donations to various Trusts.