The Income-Tax (I-T) Department is investigating transactions estimated to be over Rs 75,000 crore allegedly conducted by four asset reconstruction companies (ARCs), sources told The Economic Times.
Sources added that the investigations include questioning the ARCs on allegedly passing on just 20 percent of the amount recovered from non-performing assets (NPAs) acquired from banks. The I-T Department had raided 60 premises linked to the four companies on December 8.
Moneycontrol could not independently verify the report.
The ARCs have not been officially named, but sources said they are CFM Asset Reconstruction, Invent ARC, Omkara Assets Reconstruction and Rare Asset Reconstruction. None of these ARCs responded to queries, as per the report.
Sources added the department is still “scrutinising and studying electronic evidence” collected during the search. They added that Rs 850 crore cash has been recovered from Omkara ARC.
An official said the ARC’s cash transactions run into a few thousand crores and is “still being studied as per evidence recovered from logs stored in diary, pen drive and other electronic devices”.
They added “a larger fraud is at play”, with “a thriving ecosystem involving defaulting borrowers, ARCs, a maze of shell companies and hawala operators preferred to layer the sham transactions to hoodwink the regulators”.
Detailing how the fraud works, one senior tax official told the paper that in many cases, defaulting borrowers themselves approached these ARCs to acquire bad loans and assets pledged as collaterals from the bank.
The official noted that banks use the ‘Swiss challenge method’ where in a two-stage process the highest bidder is identified as the anchor and better prices are invited at subsequent auctions with the anchor given a chance to match the new bids.
“The method is opaque in nature and once the NPA is off the lender’s books, a proper account of what's the actual value of the collaterals and how much has been paid by the ARCs is seldom maintained by the lenders," the official said.
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