Mumbai: Promoters of Mumbai-based Housing Development and Infrastructure Ltd (HDIL) Rakesh and Sarang Wadhawan, who were arrested by the Mumbai Police's economic offense wing (EoW) in connection with a financial fraud in Punjab and Maharashtra Cooperative (PMC) bank, have been remanded to police custody till 9 October.

Rakesh Wadhawan is executive chairman, while his son, Sarang, is managing director of the Mumbai-based real estate developer. The father-son duo were presented before the EOW’s special court in Mumbai on Friday.

Given that the size of the scam is large, a detailed investigation is required, EoW told the court while seeking remand for the Wadhawans. EoW argued that 70% of depositors money was availed by HDIL as loans while creating around 21,000 fictitious accounts to "camouflaged the unaccounted loans".

Amit Desai, who represented the HDIL promoters, argued that the custodial investigation would only affect the deposits and hinder the liquidation process. Desai said that there are 49 land banks lying with the bank and fixed deposits worth 158 crore were also processed.

"The books of accounts, records and documents are all available. This isn't a terrorism case, " he said while arguing that custodial investigation was not required.

The arrest of the two promoters comes on the back of their alleged involvement in financial irregularities at PMC Bank, which prompted the Reserve Bank of India (RBI) to impose regulatory restrictions on the lender for six months. It imposed the restrictions due to concerns over large sums of loans being given to HDIL.

On 30 September, EOW filed a first information report (FIR) against HDIL and PMC Bank officials, including Thomas. The FIR had alleged possible fraud and wrongful loss of 4,355 crore and charges of cheating against HDIL.

Around 44 suspicious bank accounts linked to HDIL and its associate companies were found at PMC Bank. The accounts were masked and hidden from the core banking system, an EOW official had said at the time of arrest.

HDIL is in bankruptcy court after failing to repay its debt. The National Company Law Tribunal had admitted insolvency proceedings against HDIL following a plea filed by Bank of India under Section 7 of the Insolvency and Bankruptcy Code.

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