CHENNAI: The Enforcement Directorate (ED) on Thursday said that funds from a Rs 637 crore bank fraud case involving Chennai-based Arvind Remedies were allegedly siphoned off through shell entities with dummy directors appointed by the company’s promoter.
ED conducted searches on Tuesday and Wednesday in Chennai, Kancheepuram, Goa, Kolkata and Mumbai in the PMLA case based on the FIR registered by CBI. The CBI alleged that Arvind Remedies and its promoter, Arvind B Shah, had cheated a consortium of banks led by Punjab National Bank (PNB) of Rs 637 crore.
PNB was the leader of consortium of banks consisting of various banks namely United Bank of India, State Bank of India, IDBI Bank, Allahabad Bank, Karur Vysya Bank, Indian Overseas Bank, Corporation Bank which have extended various credit facilities (cash credit, term loan and non-fund based) of Rs. 704.75 Crore against which Rs 637.58 Crore was outstanding as per the books of the banks as on September 30, 2016. All the bank loan accounts had been declared as NPA.
The bank funds were rotated among the shell companies to show higher turnover to the banks and thereby induced the banks to lend more funds. The rotation of funds was also made to artificially rig the share price and pocket the gains. Certain parts of the funds were also diverted to acquire assets which were provided as security to the banks and later disposed of without the knowledge of the banks, thereby depriving them of assets to enforce recovery of the loans.
During the search operations, dummy Directors of the shell firms reportedly accepted that they were not aware of the affairs of the company and they were paid monthly salaries in cash by brokers. Such dummy directors signed the cheques of the shell companies for nominal commissions without knowing the purpose, ED said.
The search operations resulted in the identification of certain assets, including immovable assets and shares held by the promoters in the name of family members/ distant relatives, etc to prevent the banks from recovering loans and assets. About 15 Lakh shares of various listed as well as unlisted companies held by promoters have been frozen. The valuation of these assets is in progress and several incriminating digital and documentary evidence have been seized, ED said.