Now, an FIR in Chennai against Deccan Chronicle Holdings Ltd

HYDERABAD: Following an order from a Chennai court, the Central Crime Branch police in Chennai registered an FIR against M/s Infrastructure Development Finance Corporation (IDFC), its managing director (MD) and vice-chairman Rajiv B Lali along with two of its top officials, Vikram Limaye and Pravin Dewchell, as well as Deccan Chronicle Holdings Ltd (DCHL), its chairman T Venkatram Reddy and director P K Iyer for indulging in a criminal conspiracy to cheat genuine investors through issuance of commercial papers in the trade market despite knowing fully well that DCHL was in doldrums.
Based on the order of the court, the police registered a criminal case under various IPC sections that deal with cheating, criminal conspiracy, criminal breach of trust, etc. against all the accused based on a complaint moved by M/S Photon Infotech Pvt Ltd, the aggrieved Chennai-based software solutions firm that had bought Rs 5 crore worth commercial papers issued by DCHL through IDFC on June 1, 2012. It can be recalled that both Photon and IDFC had launched separate legal proceedings in the AP high court and the Debt Recovery Tribunal (DRT) respectively against DCHL and its promoters.
A commercial paper is an unsecured money market instrument issued in the form of a promissory note with a view to enable corporate companies to obtain short term borrowings and to provide an additional instrument to investors. The credit rating certificate pertaining to the issuer company plays a vital role in the marketing of such commercial papers. According to Photon, CARE, the credit rating agency, was duped by both DCHL and IDFC through fabricated and inflated reports which portrayed that DCHL was in a ‘sound financial condition’. Based on such a projection, CARE categorised DCHL’s credit rating as A 1+.
Interestingly, Photon Infotech said in its complaint to the Chennai court that it came to know of the ‘active conspirator role’ played by IDFC much later. IDFC, which bought huge number of non-commercial debentures and commercial papers issued by DCHL worth nearly Rs 300 crore and resold the same in the market, came to know of the bankruptcy of DCHL in April 2012 itself much before Photon bought DCHL’s commercial paper. After coming to know of DCHL’s bankruptcy, IDFC obtained an additional security from DCHL but did not disclose it to the public. This development eventually came to light during the proceedings launched by IDFC at DRT, Hyderabad, the Photon complaint says.
The conduct of the management of IDFC in obtaining an undertaking and a hypothecation from DCHL management before the maturity of commercial papers purchased by them on a stamp paper, would clearly reveal that much before the issuance of commercial paper to Photon, all the accused were fully aware of the fact that DCHL was in a state of liquidation, the Photon complaint says.