DHFL Fraud Uncovered: It’s Time to Make the Gatekeepers Pay!

Posted on 30th July, 2025 (GMT 12:55 hrs)

ABSTRACT

This mass appeal highlights the collective plight of lakhs of small depositors adversely impacted by the Dewan Housing Finance Corporation Ltd. (DHFL) financial scandal, exposing significant lapses in auditing, credit rating, and regulatory oversight. Despite glaring irregularities and large-scale fraud involving over ₹31,000 crore, statutory auditors and leading credit rating agencies repeatedly (and reportedly) failed in their fiduciary duties, issuing allegedly misleading assurances that betrayed public trust. The present appeal calls for urgent institutional accountability through independent disciplinary action by regulatory bodies including NFRA, ICAI, SEBI, and RBI, alongside demands for restitution mechanisms for affected depositors. It also underscores the need for enhanced transparency in insolvency resolution processes and structural reforms to prevent recurrence of such financial malfeasance. This appeal represents a broader call for systemic justice, ethical governance, and protection of vulnerable retail investors in India’s financial ecosystem.

Mass Appeal to DHFL Victims and Their Families: Stand United, Demand Accountability

Dear Fellow DHFL Victims, Families, and Friends,

We write to you not just as individuals who lost our life savings—but as a collective conscience betrayed by a system that promised protection and delivered silence.

The DHFL scam has left lakhs of small depositors devastated—their trust shattered, their voices unheard. Yet, amidst this darkness, our struggle continues. We must now demand answers from those who signed off the lie—the auditors and credit rating agencies who gave DHFL a clean chit while fraud festered under the surface.

But today, we call upon you—the victims, your families, your friends, and every citizen who believes in financial justice—to help amplify our voice. Let us turn our silence into a united stand.

SIGN AND SHARE THE PETITION NOW:
https://www.change.org/p/appeal-to-hold-auditors-rating-agencies-accountable-in-the-dhfl-scam

This petition demands that:

Auditors and rating agencies be held liable for deceptive certifications,
Regulatory agencies be brought under public scrutiny,
Justice be restored to depositors left out of the resolution process.

Let us not allow this betrayal to fade into forgetfulness. Sign. Share. Speak.

Together, we are not helpless—we are a movement.

In solidarity,
Once in a Blue Moon Academia (OBMA)

Given below is the petition text for your convenience:

To:
National Financial Reporting Authority (NFRA)
Institute of Chartered Accountants of India (ICAI)
Securities and Exchange Board of India (SEBI)
Ministry of Corporate Affairs (MCA)
Ministry of Finance, Government of India
Hon’ble Supreme Court of India

Background
Between 2010 and 2019, Dewan Housing Finance Corporation Ltd. (DHFL), once a AAA-rated housing finance company with clean audit reports, collapsed under the weight of a reportedly massive fraud. Investigations later revealed the siphoning of over ₹31,000 crore through shell companies, fictitious loans, and fraudulent accounting practices.

Despite these glaring alleged irregularities, leading statutory auditors (notably Chaturvedi & Shah LLP) and top credit rating agencies (CARE, ICRA, CRISIL) continued to give glowing reports and ratings to DHFL—even as warning signs were present in the public domain.

This petition is a call to action. It seeks structured accountability, not vengeance. It asks for a transparent review, legal enforcement of duties, and long-overdue reforms to protect the public from future financial disasters.

From AAA-Ratings to Haircut-Ashes: Rating and Auditing Gaps in the DHFL “Scam” VIEW HERE ⤡

Why This Matters
Thousands of ordinary depositors—including senior citizens, widows, pensioners, and salaried professionals—placed their trust in the judgments of these auditors and rating agencies. That trust was betrayed.

Even today, many affected families have recovered only a tiny fraction of their life savings. Their pain is compounded by the fact that no meaningful accountability has yet been enforced on the professionals whose endorsements enabled the scam.

What Went Wrong
Auditors’ Lapses:
Failed to detect or report irregularities in DHFL’s financials for years.
Did not report fraud as required under Section 143(12) of the Companies Act, 2013.
Issued unqualified opinions despite evidence of:

Related-party transactions
Evergreening of loans
Shell company disbursements

Legal Provisions Implicated:

Section 132, Companies Act, 2013 – NFRA’s powers to investigate and penalize
Section 143(12) – Mandatory reporting of fraud
Section 447 – Punishment for fraud
Section 448 – False statements
ICAI Code of Ethics (2020) – Clauses on independence, due diligence, and objectivity

Rating Agencies’ Failures:
Continued assigning AAA ratings to DHFL bonds until just before default.
Ratings were not aligned with actual risk or financial performance.
Ignored public whistleblower allegations, falling asset quality, and governance concerns.
Legal Provisions Implicated:

SEBI (CRA) Regulations, 1999 – Especially Regulation 3, 13, 15, and 24
Section 12, SEBI Act, 1992 – Fiduciary duty of financial intermediaries
Section 11 & 15HA, SEBI Act – Investigative and punitive powers for misleading reports

Our Key Demands
1. Independent Disciplinary Action:
a) NFRA and ICAI must initiate disciplinary proceedings against auditors involved.
b) SEBI must evaluate and act upon the role of credit rating agencies.
Actions must be taken under:

Companies Act, 2013
Chartered Accountants Act, 1949
SEBI CRA Regulations

2. Restitution for Affected Depositors:
Establish a compensation mechanism financed by penalized agencies.
Evaluate class-action or consumer protection remedies under:

Consumer Protection Act, 2019
Common law tort doctrines of misrepresentation and negligence

3. Transparency in Resolution Process:
Public disclosure of:

CoC meeting minutes under Section 21, IBC, given that despite repeated RTI appeals by certain affected depositors of the DHFL, the CoC’s expenditures were not made publicly available by the concerned agencies. View the following in this regard:

RBI and NHB inspection reports under Section 35, Banking Regulation Act
Audit working papers (within legal limits)

4. Structural Reforms:

Rotate statutory auditors regularly.
Reform CRA models to address conflict of interest from “issuer-pays” system.
Enhance NFRA’s independence and scope.
Introduce early warning systems for financial frauds.

Voices from the Ground
Many depositors affected by the DHFL default are elderly individuals living off modest incomes. They relied on financial reports and AAA ratings when choosing to invest. Their stories reflect a collective moral failure, not just a technical lapse.

We have already called for the establishment of a Truth Commission to reclaim justice for the DHFL victims. One can access and support the appeal by signing it HERE.

Our Appeal
We are not seeking retribution—we seek justice, democratic truth, and transparent public trust in the financial system.
Let this not be another case where white-collar impunity prevails over the suffering of ordinary people.

We urge you to:

Investigate the roles of auditors and rating agencies
Enforce accountability under applicable laws
Provide restitution to affected depositors
Reform structural weaknesses in oversight frameworks

Let this be a turning point in India’s financial and regulatory history.

Let us ensure that “AAA” means trust, not tragedy.

On Behalf of the Distressed DHFL Victims,

Once in a Blue Moon Academia (OBMA) VIEW HERE ⤡

Sign this petition. Share widely. Help bring justice to lakhs, who trusted and lost everything.

#DHFLScam, #JusticeForDepositors, #FinancialIntegrity, #AccountableAuditors, #RatingAgencyReform, #FinancialAbuse, #Seize_Cronies_Fairplay_for_DHFL_Victims, #alleged_dawood_mirchi_rkw_dhfl_bjp_collusion

We have also sent this appeal as an emailed letter to the above-mentioned authorities to their respective email addresses. The letter is given as follows:

To:

1. The Hon’ble Chief Justice of India
Supreme Court of India
Tilak Marg, New Delhi – 110001

2. The Hon’ble Minister, Ministry of Finance
Government of India
North Block, New Delhi – 110001

3. The Hon’ble Minister, Ministry of Corporate Affairs (MCA)

Government of India
Shastri Bhawan, Rajendra Prasad Road
New Delhi – 110001

4. The Hon’ble Governor, Reserve Bank of India (RBI)
Central Office, Shahid Bhagat Singh Marg
Mumbai – 400001

5. The Hon’ble Chairperson, Securities and Exchange Board of India (SEBI)
SEBI Bhavan, Bandra-Kurla Complex
Mumbai – 400051

6. The Hon’ble Chairperson, National Financial Reporting Authority (NFRA)
Ministry of Corporate Affairs, Government of India
New Delhi – 110001

7. The Hon’ble President, Institute of Chartered Accountants of India (ICAI)
ICAI Bhawan, Indraprastha Marg
New Delhi – 110002

Subject: Request for Institutional Accountability, Independent Inquiry, and Investor Redress in Relation to DHFL Victims’ Losses and Oversight Failures

Respected Authorities,

I hereby respectfully submit this representation as a fixed deposit holder with the erstwhile Dewan Housing Finance Corporation Ltd. (DHFL), whose deposits—along with those of lakhs of similarly placed individuals—were adversely impacted following the revelations of allegedly significant financial irregularities within the company, and the subsequent insolvency resolution process that culminated in massive haircuts unprecedented in post-independent Indian history.

While the primary fraud is attributed to DHFL’s promoters and management, numerous credible sources and expert analyses—including audit reports, RTI responses, and regulatory disclosures—suggest a possible breakdown in multiple layers of institutional oversight, which may have contributed to the scale and duration of public harm.

We hereby present our concerns as follows:

I. Background and Shared Concerns

1. Statutory Auditors appointed under the Companies Act allegedly continued to sign off on DHFL’s financial statements across multiple years, even as the company allegedly siphoned funds to shell entities and issued non-performing loans.

2. Credit Rating Agencies (CRAs) assigned high credit ratings (including AAA ratings) to DHFL instruments during periods in which the company’s financial practices have now been called into question.

3. Regulatory Bodies including SEBI, RBI, and NHB, which had reported oversight over non-banking finance companies (NBFCs) and financial disclosures, appear—based on available records—to have taken delayed or limited action in response to emerging red flags.

4. Retail Fixed Deposit (FD) Holders and Non-Convertible Debenture (NCD) Holders, lacking access to privileged financial information, placed trust in these professional and institutional assessments. The subsequent insolvency resolution process has left many of us with severe financial and emotional losses, with no clear accountability from the professional entities who validated or enabled DHFL’s credibility in the public domain.

Furthermore, repeated RTI applications filed by aggrieved depositors have revealed a striking lack of transparency regarding the expenditures incurred by the Committee of Creditors (CoC) during the insolvency resolution process. Despite the fact that these costs were deducted from the total recovery pool—thereby impacting the final payout to depositors—there has been no itemized public disclosure of fees paid to advisors, legal firms, or valuation professionals. Regulatory bodies such as SEBI, RBI, and IBBI have either denied access to this information or redirected applicants without substantive answers. This opacity not only violates the spirit of the Right to Information Act, 2005, but also raises broader concerns about institutional accountability and due process in large-scale insolvency cases involving public funds and small investors. Kindly view more on this issue in the following:

II. Legal and Ethical Concerns (Prima Facie)

While the final determination of liability remains subject to ongoing proceedings and further investigation, the following issues are respectfully highlighted for your consideration:

Potential professional misconduct by statutory auditors, if they failed to exercise reasonable care, diligence, or independence as required under the Companies Act, 2013 and the ICAI Code of Ethics.
Possible conflict of interest or lack of due diligence by CRAs under SEBI (Credit Rating Agencies) Regulations, if high safety ratings were issued despite deteriorating financial conditions.
Regulatory oversight gaps, possibly inconsistent with the mandates under the SEBI Act, RBI Act, and other applicable statutes, including the constitutional principles of public accountability and fiduciary trust.
Violation of rights under Articles 14 and 21 of the Constitution of India—particularly the rights to equality, dignity, and protection of property so as to ensure the right to livelihood—where small investors appear to have suffered disproportionately, without sufficient safeguards.

III. Humble Requests and Suggested Institutional Action

In light of the above and in the spirit of constructive redressal and institutional integrity, I respectfully request the following:

1. NFRA and ICAI to initiate or expedite an independent disciplinary review into the statutory audits conducted during DHFL’s financial reporting between 2015 and 2019, including an inquiry into adherence to professional and statutory obligations.

2. SEBI to review the conduct of the credit rating agencies involved with DHFL during the relevant period, including the internal processes adopted for risk assessment and conflict management.

3. Ministry of Corporate Affairs to consider recommending structural reforms in the audit oversight and CRA regulatory frameworks to enhance transparency and public accountability.

4. Ministry of Finance and RBI to establish a mechanism—either through statutory compensation funds, insurance, or targeted schemes—to provide some form of restitution or redress to small depositors impacted by institutional failures beyond their control.

5. The Hon’ble Supreme Court of India, in its constitutional capacity, is humbly requested to take suo motu cognizance or admit appropriate public interest litigation (PIL) or writ petitions that may seek:

o Constitution of a High-Level Judicial Truth Commission or Ethics Tribunal (for which we have already submitted an online mass petition VIEW HERE ⤡);

o Review of systemic regulatory failures;

o Protection of vulnerable retail investors in NBFCs.

IV. Without Prejudice

This representation is submitted without prejudice to my and others’ legal rights to initiate or participate in:

Petitions before consumer fora under the Consumer Protection Act, 2019;
Civil suits for misrepresentation or professional negligence;
Class-action or writ petitions under Articles 32 and 226 of the Constitution of India for constitutional and public law remedies.

V. Public Campaign and Solidarity

In addition, I and other affected citizens have signed and circulated a public petition seeking justice in this matter. The petition may be viewed here:

https://www.change.org/p/appeal-to-hold-auditors-rating-agencies-accountable-in-the-dhfl-scam

We had previously submitted an earnest appeal to the esteemed authority of the ICAI on 14th March 2021⤡, raising similar concerns. Regrettably, no response was received to that representation.

Therefore, we humbly urge your esteemed offices to take cognizance of this growing appeal for systemic accountability and investor protection.

Yours Most Sincerely,

Dr. Debaprasad Bandyopadhyay

On Behalf of all the distressed DHFL Victims (Usual Disclaimers Apply),

as voiced through Once in a Blue Moon Academia (OBMA)⤡

SEE ALSO:

From AAA-Ratings to Haircut-Ashes: Rating and Auditing Gaps in the DHFL “Scam” VIEW HERE ⤡

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