Mumbai: A special court has rejected the Central Bureau of Investigation’s (CBI) request for further investigation into the alleged role of Indiabulls Housing Finance Ltd and IVL Finance Ltd in the ₹4,733 crore Yes Bank-DHFL loan fraud case.
The court said the CBI failed to present sufficient material establishing the need for a fresh investigation against Indiabulls or its former promoters. The court also highlighted the CBI’s own affidavit filed before the Supreme Court, in which the agency had stated that there was no direct allegation of diversion or siphoning of funds against Indiabulls Housing Finance or its former promoters. The court considered this position significant while examining the agency’s subsequent request for further investigation.
The case originated from a complaint against Rana Kapoor, the former managing director and chief executive officer of Yes Bank. Kapoor was accused of entering into a criminal conspiracy with other accused persons and allegedly misusing ₹4,733 crore. The initial complaint was filed against DHFL and 11 others. The CBI filed its first chargesheet on June 25, 2020, followed by supplementary chargesheets in July 2021, June 2022 and July 2022.
In its fourth supplementary chargesheet filed on October 24, 2024, the CBI named Indiabulls Housing Finance Ltd and IVL Finance Ltd as accused. However, the special court had earlier refused to take cognisance against the two companies. The CBI challenged that order before the Bombay High Court, where the matter remains pending.
The CBI later sought permission for further investigation, claiming that certain new facts had emerged regarding the alleged movement of funds. According to the agency, loans extended by Yes Bank to entities allegedly linked to real estate businessman Sanjay Chhabria came under scrutiny following a Reserve Bank of India inspection in January 2017.
The CBI alleged that certain loans sanctioned by Indiabulls were used to close or adjust outstanding loan exposure with Yes Bank. It further alleged that ₹19.3 crore was transferred to IVL Finance, which the agency described as an affiliated entity of Indiabulls.
The agency also claimed that its subsequent investigation revealed large financial transactions between Yes Bank and entities allegedly connected with the Indiabulls group. These included loans of ₹290 crore each to Tupelo Constructions Pvt Ltd and Tupelo Land Development Pvt Ltd, ₹85 crore to Paidia Connection Pvt Ltd, and loans of ₹1,000 crore and ₹1,100 crore to IVL Finance in separate financial years.
The CBI argued that these transactions required further examination to determine whether there were alleged quid pro quo arrangements involving financial benefits and reciprocal favours. The agency maintained that these facts had not been available when the fourth supplementary chargesheet was filed and therefore justified a further investigation.
However, the special court relied heavily on the CBI’s earlier position before the Supreme Court. The court referred to the agency’s statement that the alleged acts of Indiabulls Housing Finance had not caused any loss of public money. The CBI had also stated that there were no direct allegations of diversion or siphoning of funds against the company or its former promoters and that no prima facie criminal act had emerged from the available material.
The court held that the prosecution must place substantive material on record before seeking permission for further investigation. Merely pointing to subsequent transactions or raising questions about financial dealings was not sufficient to justify reopening the investigation against the companies.
Dhani Loans and Services Ltd had also sought permission to intervene in the proceedings, stating that it had stepped into the position of erstwhile IVL Finance. The company argued that further investigation should not be permitted without a sufficient factual and legal basis, particularly when cognisance had not been taken against the concerned company.
The CBI opposed the intervention, maintaining that an accused or proposed accused does not have an automatic right to be heard at the stage of further investigation. The court agreed that the accused need not necessarily be heard before every further-investigation decision but stressed that the prosecution must first demonstrate credible material warranting such a step.
With the court rejecting the CBI’s plea for further investigation, Dhani Loans and Services’ intervention application also became ineffective. The broader case will now continue amid the pending proceedings before the Bombay High Court and the ongoing legal process arising from the original Yes Bank-DHFL loan fraud allegations.
