In today’s Finshots, we tell you how Arvind Dham, the promoter of Amtek Auto, committed thousands of crores of bank fraud. 

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The Story 

Banks love lending to big corporations, especially when they look like bright stars of the business world. And if it’s a blue-chip company, the money flows even faster! But sometimes, that trust is thrown out of the window when these seemingly trustworthy companies default on their loans, leaving banks scrambling to recover losses. And that’s exactly what happened with Amtek Auto. 

But why are we talking about this now? 

Because just last week, the Delhi High Court denied bail to Arvind Dham, the man at the centre of Amtek Group’s spectacular collapse. 

Now, you might or might not have heard of Amtek Auto. So, let’s give you some context.

See, Arvind Dham was an ambitious man. Despite coming from a family business in construction, he chose to start Amtek, a company that supplied auto components to car manufacturers. And it rose to popularity when a contract from auto giant Maruti to supply brake pads came its way.

Soon after, it tasted more success when the Indian economy opened its doors to the world via the liberalisation (LPG - liberalisation, privatisation, globalisation) reforms. It won contracts from Tata Motors and Ford Fiat, and the business started booming. Since then, there was no looking back for Amtek.

Then came the 2000s, when Dham went on a shopping spree. To expand Amtek’s business, he acquired one of its biggest competitors in the UK and upwards of 20 other overseas companies.

But here’s the catch. The money for these big-ticket acquisitions (ranging from ₹500 to ₹700 crore) didn’t come from Amtek’s revenue or profits but from debt. Yup, the debt that Amtek took from multiple Indian banks. And banks were more than happy to fund this expansion spree. After all, it had built a reputation that made it trustworthy and simply too big to fail.

And that’s probably where things started to go downhill. Amtek kept expanding, but by 2015, the cracks began to show. Its bank debt had nearly quadrupled from ₹3,800 crores to a staggering ₹14,200 crores, and defaults had already started.

Now, ideally, that should have been the moment for banks to step in and sound the alarm. But they didn’t. Maybe because banks have their own way of doing things. In the case of listed companies, they don’t immediately flag defaults as NPAs. Doing so requires setting aside higher provisions for the defaulted amount, which can impact their balance sheets. That’s why they wait and watch for a while.

Anyway, coming back that same year, Amtek also defaulted on its bond payment of ₹800 crores. And that’s when banks began to realise that the auto giant may be a lost cause. In 2017, Dham’s house of cards fell when banks finally stopped trusting him and took Amtek to bankruptcy court under India’s Insolvency and Bankruptcy Code (IBC). Enacted in 2016, the IBC was meant to clean up a growing pile of corporate bad loans in the banking sector. And Amtek became one of the first 12 big firms (nicknamed the “Dirty Dozen”) to be dragged to court under the new code.

But here’s the thing. Despite his company being in bankruptcy court, Dham’s life was going smoothly. In fact, a few buyers pitched in to buy it too. So yeah, everything was great. He had set up a company, accumulated debt, filed for bankruptcy and was getting bids from buyers. Dham would have been unperturbed, as he didn’t have to pay back those hefty loan amounts to the banks. 

However, the real twist came in May 2022, when a whistleblower blew the lid off the scam, quietly brewing under wraps for years. The whistleblower filed a complaint with the Prime Minister’s Office, CBI and ED, revealing that Amtek was toying with its lenders’ trust behind their backs. Not all the borrowed money went into acquiring the business as intended. And with no one suspecting foul play, Dham had been quietly siphoning funds from the Amtek Group of listed companies into a web of shell companies that had no real businesses. Only then did the investigation authorities pitch in and launch a full-fledged probe.

We came across The Morning Brief, ET’s podcast, where an ET reporter conducted first-hand ground reporting. And what he uncovered was mind-boggling.

For starters, there wasn’t just one shady shell company. There were hundreds of them, and that too was with dummy directors — some of whom were peons and office boys at Amtek Auto who had no clue their identities were being misused. Imagine earning a modest salary and suddenly being listed as the director of a company handling crores of rupees. That’s exactly what was happening there. These shell companies existed solely to move money around from Amtek Group-listed firms, making it nearly impossible to trace where the funds ultimately landed.

While Amtek Auto was in bankruptcy proceedings (2017), he and his family were invested in multiple businesses, including the famous coffee chain Barista. They held directorial positions in companies linked to real estate and steel. When the ED finally intervened last year, they unearthed massive commercial properties and prime-location farmhouses worth thousands of crores. If that wasn’t enough, the ED also froze shares worth over ₹2,000 crores held by the Dham family across listed and unlisted companies.

So, while banks and creditors were bleeding, the Dham family secured its financial future.

But the real question is: Where were the audit teams when all this was happening?

Well, in 2018, a forensic audit by EY raised red flags. Their report uncovered hundreds of crores funnelled through undisclosed related-party transactions. Yet, nothing solid happened for almost four years until 2022. There was no major investigation and no accountability. That is, until a whistleblower’s complaint reached the Supreme Court, forcing authorities to act. Even the Court had the same question: Why was this not investigated earlier, despite EY’s findings?

At first glance, it seems baffling. And there’s actually no buzz about why no probes or investigations took place. But when a second audit was done in 2020, it unequivocally reported that there were no fraudulent transactions at all, contradicting EY’s earlier findings. So yeah, this may have given the investigation agencies sort of an excuse to let it go.

There’s another factor too. By then, Amtek was already deep into insolvency proceedings, and banks were desperate to recover their losses. A full-blown investigation could have complicated things, making it even harder for banks to reclaim their funds. So they may have chosen to keep mum.

And that may have been a costly mistake because, despite all the scrutiny now, only a fraction of the ₹20,000 crores+ loaned to Amtek has been recovered. A US-based hedge fund that took over Amtek paid merely a few hundred crores, a drop in the ocean compared to what banks had lent. Simply put, the banks will never wholly recover their money.

But Amtek and Arvind Dham’s saga has become a cautionary tale of ultra-high ambitions, greed and corporate fraud in India. It must be seen as a case study of unchecked debt-fueled acquisitions, weak regulatory oversight, and financial mismanagement — where a once-thriving company collapsed under its own weight, and banks paid the price for looking the other way.

Any thoughts about how this could have been prevented in the first place? Let us know.

Until then...

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