Case study on DHFL

Scandal
 Introduction
 Dewan Housing Finance Corporation Ltd. (DHFL)
is a non- banking financial company (NBFC).
 NBFCs are the companies established under Companies
Act, 2013.
 Union Bank of India in its complaint has alleged that
DHFL had taken Rs 42,871 crore as loans.
 History
 DHFL was incorporated by Rajesh and Kapil Wadhawan and established (11 April 1984)
to enable access to economical housing finance to the lower and middle income groups
in semi-urban and rural parts of India. DHFL was the second housing finance company
to be established in the country. The company also leases commercial and residential
premises.
 The name of the company was changed to Dewan Housing Development Finance Ltd.
and later to Dewan Housing Finance Corporation
 This the firm further made an acquisition of 74% stake at DHFL Pharmecia Life
Insurance Company Limited in 2013.
 What went wrong?
• The company was accused of using inter-corporate deposits, or funds deposited by one
company with another, as a means of diverting funds and concealing debts.
• It was also alleged that the company engaged in round-tripping, or the practice of
moving funds between different entities in order to create the appearance of legitimate
transactions.
• The company’s financial trouble came to the light in 2018, and it was later placed under
the administration of the National Law Tribunal.
• In 2020, DHFL was declared a wilful defaulter, meaning that it had defaulted on its debt
despite having the ability to pay.
Legal actions taken:
• The company has been placed under the administration
of the National Company Law Tribunal (NCLT)
• In addition, several individuals, including the company’s
promoters, have been charged with various offenses,
including conspiracy, fraud, and misrepresentation.
• The Central Bureau of Investigation (CBI) and the
Enforcement Directorate (ED) are among the agencies
that have launched investigations into the alleged wrongdoing
at DHFL.
 Connection to ethical theories
Immanuel Kant (Kantian Theory of Duty)
o This theory states that Morality of an action only depends on the motive,
and is independent of the effects on the person doing it or on the others
o Intention or motive matters (means) more than the consequences (end
result).
o Here the scam was for personal benefit.
Connection to the stages of Lawrence Kohlberg’s model

• The Lawrence Kohlberg’s theory outlines six stages of moral development

in three levels which are the Pre-Conventional Morality, Conventional
Morality and Post- Convention Morality.
• In the case of DHFL, there was money laundering done which is done by
breaking the law and the social order is disturbed.
• This is the stage 4 which belongs to the conventional morality wherein we
have a complete idea about the law and orders which are maintained in the
society and we should ensure that it is not broken.
 Recommendation
• Recommendations regarding housing loan frauds
• 1. Beware about fake home loan and assurance
• 2. Fake sanction letter
• 3. Fake phone calls and messages
• 4. Online payments
• 5. Payment request through OTP
 Conclusion
• Indian investors can suffer a great deal from scams like this. 
• What we can learn from this is that banking laws and policies need to be
strong and stringent.
• In order for the country to prosper, it can only hope to see financial and
business advisory groups without corrupt motives. 
• In light of the facts listed above, it is quite evident that DHFL scam
remains one of the most significant scams ever perpetrated.
• As of now, the case is still pending, and we must wait until the judgment
is rendered.