finance | IST

PIL against IndiaBulls Housing Fin: MCA finds no foul play in loan allocations cited, spots other violations

Shares of Indiabulls Housing Finance saw a sharp rally in the last hour of trade on Thursday after the Corporate Affairs Ministry filed an affidavit in the Delhi High Court on the inspection it had ordered to investigate alleged irregularities by the company.

Just a day before the Delhi High Court hearing, an affidavit filed by the Ministry of Corporate Affairs has come as a mixed bag for IndiaBulls Housing Finance. While on the one hand, MCA's inspection report has found no signs of foul play in the loans cited by the PIL, on the other hand, there are other violations that have surfaced.
The MCA, acting under Section 205 of the Companies Act, had directed an inspection of books of account of Indiabulls Housing Finance, Indiabulls Ventures and Indiabulls Real Estate in July of 2018. The MCA received the inspection reports of IVL and IHFL in November 2019. It is yet to receive the inspection report of IRE.
The MCA affidavit before the Delhi High Court states that the PIL raised concerns and allegations based on loans extended by IHFL to DLF, Amricorp, ADRG, Vatika and Chordia. The affidavit says that of the five, DLF, ADRG and Amricorp have fully repaid the loans extended. Meanwhile, as per the affidavit, the other two entities are categorised under "standard accounts", thereby suggesting that the two entities have been regularly servicing their debt.
This clarification by the MCA is similar to arguments used by counsels of IHFL. The Indiabulls lawyers have repeatedly argued that while the PIL raises questions about the loans extended, they have been either fully repaid or are being serviced regularly.
However, the MCA affidavit also records that the very same inspection reports have revealed violations. The affidavit is silent on the nature and severity of violations. However, it does state that these violations are being examined and will be "dealt with as per law".
The MCA made this submission after it was made a party in a PIL, pending before Delhi High Court. The PIL had alleged siphoning off of funds and accounting irregularities by Indiabulls Housing Finance and its promoters. It had alleged that the IBHL had been extending dubious loans to entities that are controlled by large corporate entities, which route the money back to entities owned and controlled by Indiabulls promoters. The PIL had sought a court-monitored SIT probe into the allegations.