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Indiabulls claims clean chit citing MCA affidavit; Delhi High Court to wait for other regulators’ reply

Indiabulls claims clean chit citing MCA affidavit; Delhi High Court to wait for other regulators’ reply

Indiabulls claims clean chit citing MCA affidavit; Delhi High Court to wait for other regulators’ reply
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By Ashmit Kumar  Nov 29, 2019 3:51:42 PM IST (Published)

Indiabulls Housing Finance's lawyers, on Friday, claimed to have been vindicated, citing the inspection reports of the Ministry of Corporate Affairs (MCA). IHFL argued that the MCA affidavit had found no instances of foul play in the loans extended to 5 entities, that had been red-flagged by the PIL.

Indiabulls Housing Finance's lawyers, on Friday, claimed to have been vindicated, citing the inspection reports of the Ministry of Corporate Affairs (MCA). IHFL argued that the MCA affidavit had found no instances of foul play in the loans extended to 5 entities, that had been red-flagged by the PIL.

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The Delhi High Court, at this stage, refused to pass any interim orders. The court has directed the RBI, SFIO and Sebi to file a reply. Meanwhile, fresh notices have been issued to the ROC and the NHB. The next hearing in this case is scheduled for February 28.
The court has been hearing arguments in a PIL moved by Citizens' Whistleblower Forum. The PIL had alleged that IHFL and its promoters had misdirected and siphoned off funds by extending fraudulent loan facilities to shell companies owned and controlled by large corproate groups.
The MCA affidavit had stated that inspection of books of accounts of IHFL had been directed in July of 2018. The affidavit claimed that the inspection report had been received earlier in the month of November.
The MCA affidavit reasoned that the PIL had red-flagged loans extended by IHFL to five specific entities. As per the inspection report, the MCA claimed that out of the five entities, three had fully repaid the loans, while two had been listed as a "standard account". Classification as a "standard account" indicates that the debt is being serviced regularly.
Independent audits and investigations underway
IHFL counsels cited these findings from the MCA affidavit to argue that there was no evidence of foul play on the transactions red-flagged by the PIL. Further, the IHFL lawyers contended that independent audits and investigations by National Housing Bank and the RBI were also underway.
IHFL also claimed that regular business and finance operations of the company had been hit and that the Delhi High Court should pass directions to clarify that the pendency of the plea should not come in the way of regular business operations.
The petitioners in the PIL, represented by Prashant Bhushan, rebutted the arguments of IHFL. He argued that the MCA inspection reports had discovered various other violations that were pending examination. He also argued that the PIL had sought copies of the inspection reports, but had not been brought on record by the MCA.
Bhushan also argued that none of the other regulators such as the RBI, Sebi, ROC, NHB or SFIO had furnished any information about investigations of inquiries, if any, conducted into the business operations of IHFL.
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