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Enforcement Directorate names JSW Steel in BPSL case

The Enforcement Directorate on Friday filed a charge sheet against former Bhushan Power and Steel Ltd CMD Sanjay Singal and others in a multi-crore money laundering case linked to an alleged bank loan fraud.

, ET Bureau|
Last Updated: Jan 18, 2020, 10.28 AM IST
ED files chargesheet in Bhushan Power and Steel case
ED files chargesheet in Bhushan Power and Steel case
MUMBAI: An Enforcement Directorate charge-sheet in the Bhushan Power & Steel (BPSL) case Friday mentioned JSW Steel as a joint venture partner of the debt-laden company in a coal entity, implying that as acquirer of the distressed asset, JSW Steel could remain within the ambit of an ongoing financial mismanagement probe.

“The liability of corporate debtor shall not cease for the impugned offences under PMLA as the resolution plan… is not resulting in change in management or control of the corporate debtor to a person who was not a related party of the corporate debtor, for the reason that JSW Steel is a ‘related party’ of the corporate debtor, being an associate company which has formed a joint venture with the accused-corporate debtor,” read the charge-sheet.

PMLA refers to the Prevention of Money Laundering Act, offences under which are probed by the agency.

According to the Enforcement Directorate, BPSL and JSW Steel are associated as shareholders, owning 24.09% and 49% equity, respectively, in a joint venture company called Rohne Coal Company Private Ltd (RCCPL). Citing periodic customary filings before the Ministry of Corporate Affairs, the charge-sheet further said that the joint venture company, founded in 2008, is “still in operation.”

Officials at JSW Steel could not be immediately reached for their response.

JSW Steel, which has offered to pay more than Rs 19,000 crore for BPSL in a bankruptcy sale, has sought to be excluded from regulatory and criminal probes against the target company under the watch of the erstwhile management. It has also sought exemption against attachment of BPSL assets.

“In case the answer is in the negative, they (the Enforcement Directorate) will enclose the evidence in support of their stand,” the charge-sheet read, in reference to JSW Steel’s plea to be excluded from the ambit of any probe.

Late last year, the government made relevant changes in bankruptcy laws to shield buyers of distressed assets from criminal and regulatory proceedings, subject to the fulfilment of conditions.

Separately, the Enforcement Directorate named Sanjay Singal, erstwhile CMD of BPSL, as the mastermind behind diversion of loan funds in the charge-sheet.

BPSL had acquired Rs 4,025.23 crore in the form of equity capital infused by the Singals and associated promoter companies, “...which was sourced from illegally diverted funds, out of loans taken by BPSL from various banks,” the agency said in its charge-sheet.

The Singals, in the past, have refuted the allegations. Singal, who is in judicial custody, was represented through his counsel, Vijay Aggarwal.

“Singal in his statement admitted the modus operandi employed by him for routing the amounts transferred by BPSL to various parties on account of purchase of goods, where no actual movement of goods took place, and as capital advances,” said the charge-sheet. “It was categorically admitted by him that long-term capital gains amounting to Rs 695.14 crore were artificially generated by his family members and himself and an amount of Rs 699.46 crore was invested by his family members and himself in BPSL out of the funds so generated in their accounts as LTCG, which were nothing but the funds diverted from the accounts of BPSL,” said the charge-sheet.

On the modus operandi, the agency’s probe has revealed that the accused allegedly siphoned funds obtained as loans from various banks/financial institutions. Eighty-seven fictitious parties were allegedly approached by co-accused Ritesh Kapoor. “... Kapoor offered monetary incentives to these persons to lure them to provide a vehicle for siphoning of the funds. These persons were willing accomplices, who for their own selfish ends, had joined hands with BPSL as it also involved increase in their own turnovers, thus leading them to negotiate with their bankers to lend more funds to themselves in addition to the monetary incentives,” said the charge-sheet.

BPSL used to transfer funds via RTGS to these parties as advances for purchase of capital goods. These parties were instructed to issue invoices in the name of BPSL, Orissa plant.

“...Some of these suppliers have been examined and these persons have admitted such fake transactions to the tune of Rs. 225 crore approximately, and investigations in respect of the remaining suspect suppliers are being carried out,” said the charge-sheet.

After receipt of funds in their bank accounts, these parties used to transfer equivalent amounts in cash to BPSL. “...After transfer of cash by these parties through Kapoor, using the services of angadiyas, Alkesh Sharma, acting upon the instructions from R. P. Goyal and Sanjay Singal, used to transfer the said cash amount to various entry operators,” said the charge-sheet. Then these were converted into LTCG, which was exempt from income tax.

According to the ED, the entry operator would cause to purchase shares of what was known as penny stock companies at a very low price either through the stock exchange or through preferential allotment in the name of Sanjay Singal, Aarti Singal, Aniket Singal and Sanjay Singal (HUF), collectively referred to as “Singals”.

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