Novtej Dhillon and his former wife, Sarina Dhillon, directors of a number of hotel companies, have been disqualified from acting as directors for 11 years and four and a half years, respectively.
An Insolvency Service investigation found that Mr Dhillon caused, and Ms Dhillon allowed, the companies to operate in a manner which lacked probity, as a result of which a bank suffered a loss totalling £31.8m.
Mr and Ms Dhillon were directors of Dhillon Hotels, Liongate Hotel, Crown Hotel (Amersham), which entered administration on 20 September 2012, and PHB Realisations 2013 (formerly Paragon Hotel (Birmingham)) and Paragon Birmingham, which entered administration on 21 September 2012.
The companies had operated the Olde Bell Coaching Inn in Hurley-on-Thames; the Lionsgate hotel in Kingston-upon-Thames; the Crown Inn in Amersham; and the Paragon hotel in Birmingham, with Paragon Hotel (Birmingham) being a holding company.
All were subject to the same bank lending facility and cross guarantees. The investigation found the Dhillons utilised the various companies for personal expenditures which were attributed by the group accounting department to director loans, these directors being Mr and Ms Dhillon.
The lending facility was subject to strict covenants regarding the ratio of turnover to lending/interest. The bank was provided with regular management accounts which showed that the covenants were being met. These were inaccurate, the investigation found.
Accounts were then filed at Companies House which were consistent with management accounts presented to the bank (in the form of year-end adjustments within the accounting system).
These adjustments had the effect of obscuring personal expenditure and inflating the value of assets, thereby inverting and obscuring the true position.
In tandem with these erroneous adjustments, a large property (Paragon hotel in Birmingham) was presented, from 2009, as being about to be sold to an unconnected third party. This sale was asserted to be subject to delays, during which time nearly £13m more was loaned against the security it was purported to provide.
The truth was the supposed purchaser had entered administration in 2009. The property was ultimately sold for £3m by the office holders in 2013.
At administration the bank was owed more than £48m with secured assets being realised/valued at £16,537m, resulting in an estimated shortfall of more than £31m.
Cheryl Lambert, chief investigator at the Insolvency Service, said: "In this case, Mr Dhillon was responsible for the construction of a long term and complex web of lies, by manipulating the internal financial systems of a group of companies. Additionally, the sale of a very large asset was claimed to be occurring resulting in almost £13m of further lending being made, which were then used within their empire of companies and which allowed the Dhillons to continue to benefit from their continued operation.
"In court proceedings relating to Mr Dhillon's business affairs a judge branded him as a man who ‘regards truth as a merely optional extra when doing business'. Following the Insolvency Service's investigation I can only agree with that conclusion.
"Ms Dhillon took no action to prevent the long term implementation of that deceit, whilst benefiting from the continued operation of the companies and the increased funds overdraft extensions.
"This activity goes to the very core and basis of the economic system, with Mr Dhillon knowingly creating a scheme to obscure his activities and the real position in relation to the company's trading and solvency."
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