Bank fraud: Deccan Chronicle promoter Venkatram Reddy arrested by ED

HYDERABAD: The Directorate of Enforcement, popularly known as ED, has arrested former promoters of Deccan Chronicle Holdings Limited (DCHL), T Venkatram Reddy and P K Iyer and company's auditor Mani Oommen in a long-pending bank fraud case. The trio were arrested on Tuesday after being questioned by the ED sleuths for several hours.

The ED had registered a money-laundering case against DCHL and its promoters in 2015 after studying a CBI FIR registered to investigate the alleged bank loan default. The ED alleged that the promoters had manipulated the balance sheets of the company, inflated the profits, advertisement revenue and grossly understated the financial liabilities of the company to cheat the banks and its shareholders.

The ED's investigation found that DCHL had taken loans of over Rs 8,180 crore from a consortium of 18 banks, but had defaulted on repayment of over Rs 1,500 crore. The ED also found that the promoters had diverted the funds, taken as loans from the banks, for personal use and had acquired assets worth over Rs 386 crore in their names and in the names of their family members.

In another significantly-related move, the ED has attached assets worth Rs 386 crore belonging to DCHL and its promoters. The attached assets include 14 properties located in New Delhi, Hyderabad, Chennai, Bangalore and Gurgaon. The ED has also filed a chargesheet against the accused in a special Prevention of Money Laundering Act (PMLA) court in Hyderabad.

The arrests of the DCHL promoters and auditor is a major breakthrough in the ED's investigation into the bank fraud case. The ED is likely to question the accused about the source of the funds, used to acquire the assets, and the role of other individuals and entities in the case.

The arrests of the DCHL promoters and auditor have come as a major blow to the company, which was once one of the leading media entities in India. As a consequence of the crackdown of law enforcing agencies in the wake of the fraud accusations, the company has been facing a severe financial crunch for several years and has been struggling to repay its loans. The arrests of the promoters are likely to further delay the resolution of its financial troubles.

The arrests of the DCHL promoters and auditor are also a major embarrassment for the Indian banking system. The case highlights the loopholes in the banking system that allow promoters to take loans and then default on repayment. Similarly, the case is likely to put pressure on the Union government to take steps to strengthen the banking system and prevent such frauds from happening in the future.