Bank loan fraud: ED arrests former Bhushan Steel CMD Sanjay Singhal

The Enforcement Directorate on November 22 arrested former Bhushan Power and Steel Ltd CMD Sanjay Singhal in connection with its probe in a multi-crore money laundering case linked to an alleged bank loan fraud.

According to ED officials, Singhal was arrested under the Prevention of Money Laundering Act (PMLA) after he was questioned for several hours in the evening in connection with the case.

Singhal was placed under arrest as he was not cooperating in the probe and will be produced before a local court here on November 23 to seek further custody, an ED official said.

The ED recently attached assets worth Rs 4,025 crore of Bhushan Power and Steel Limited (BPSL) in this case.

"An amount of Rs 695.14 crore was introduced as capital by Sanjay Singhal, the then CMD of the company, and his family members in BPSL out of artificially generated long-term capital gains (LTCG) by diversion of bank loans fund of BPSL," the ED had said.

LTCG was exempted from income tax during the relevant time, the agency said.

The ED's case of money laundering was filed after studying the FIR registered by the Central Bureau of investigation (CBI) against the company, Singhal and others on charges of corruption.

The CBI's FIR had alleged that BPSL, through its directors/staff, fraudulently diverted about Rs 2,348 crore from the loan account of Punjab National Bank (Delhi and Chandigarh), Oriental Bank of Commerce (Kolkata), IDBI Bank (Kolkata) and UCO Bank (Kolkata) into the accounts of various companies or shell companies without any obvious purpose and thereby misused the funds.

The ED said that BPSL had also made RTGS payments to various entities against "fictitious purchases" of capital goods.

Against the RTGS payments, these entities had transferred cash to BPSL which was ultimately traced to have been used for generation of artificial LTCG by jacking up the prices of penny stocks by way of synchronised trading, the ED had said.

Another amount of Rs 3,330 crore invested as equity (share capital and premium) by promoter companies was also found to have been routed out of the funds obtained as various loans and diverted from accounts of BPSL in the shape of advances shown to various shell companies by the different entry operators, the agency had alleged.

The proceeds of crime in this case, the agency said, were laundered by way of introduction into the books of accounts as equity for window dressing the debt equity ratio.