Assets worth over Rs 90 crore of a Hyderabad-based road construction company have been seized under anti-money laundering law in a case related to alleged bank loan fraud , the Directorate of Law Enforcement (ED) announced on Saturday.
An interim order was issued on Thursday under the Prevention of Money Laundering Act (PMLA) to seize 105 land properties located in Telangana (Hyderabad), West Bengal and Andhra Pradesh (districts of Visakhapatnam, Prakasam and Krishna) and movable property worth Rs 7.36 crore, including the promoters’ stake in the company called Madhucon Projects Ltd, totaling Rs 96.21 crore.
The money laundering case stems from a March 2019 FIR CBI filed against Ranchi Expressways Limited (a Madhucon Group company) and its directors.
The deal started after the National Highways Authority of India (NHAI) awarded a 277.50 km (about 163.50 km) NH-33 four-lane project on the Ranchi-Rargaon-Jameshdpur section on an annuity basis on the Design, Build, Finance, Operate and Transfer (DBFOT) model to Madhucon Project Limited on 18.03.2011.
“A special purpose vehicle called Ranchi Expressway Limited (REL) was formed by Madhucon Group to execute this project. Kamma Srinivasa Rao, S Nama Seethaiah and Nama Prithvi Teja were the founding directors of the said company and Madhucon Project Limited was the Engineering Procurement Construction (EPC) sub-contractor for the project,” ED said in a statement.
The ED alleged that Madhucon Group “could not complete” the project despite using the full loan amount, and subsequently their contract was terminated and the company was booked based on the instructions of the High Court, which were in turn based on reports of serious fraud. office of investigation (SFIO) and the NHAI.
The investigation revealed that Ranchi Expressways Limited, represented by its directors and promoters, had secured loans of around Rs 1,030 crore from a consortium of banks led by Canara Bank, the agency said.
The Madhucon Group “did not” use the entire amount of the loan for the stated purposes, and diverted it to its associated entities for other works and also directly “siphoned” the loans by giving bogus works to its fictitious related entities, he said.
“The works on the land suffered and they were unable to complete the works despite withdrawing the entire amount of the loan. They also managed maintenance reports and work progress reports to wrongly claim higher expenses,” the ED alleged.
The group, he said, was not doing well financially for many years and after winning the tender for the Ranchi-Jamshedpur project, Madhucon Group set up the SPV (REL) and made round trips of loan funds to show the investment of fake promoters. to get the very first drawing of the loan from the bank.
Therefore, it is clear that from the very beginning, Madhucon Group has been involved in creative account designs to deceive the banks/NHAI, according to the agency.
In the end, Madhucon Group was unable to repay the loans and the account turned into an NPA (non-performing asset).
A ‘key finding’ of the case was, according to the ED, that the LIE (the lender’s independent engineer) chosen for this project was a fully related party to the Madhucon Group and was therefore not independent. and that he consistently published erroneous reports favorable to the group.
“Multiple inspections by forensic auditors and NHAI revealed that the progress on the ground of the works carried out by Madhucon Group was only 50.24%, when they had already drawn … 90% of the loan amount “, said the ED.
“Direct cash in the amount of Rs 75.50 crore was generated by paying in money and then receiving the amount through six fictitious entities (Usha Projects, Shree BR Visions, Sri Dharma Saastha Constructions, Sree Nagendra Constructions, Ragini Infrastructure and Varalakshmi Constructions) which were completely under the control of their chairman Nama Nageshwara Rao and Nama Seethaiah.”
“These contractors did not work, had insufficient expertise, were based in AP/Telangana, while the project was in North India, and they took big advances from MPL on the loan funds and then repaid huge sums to Madhucon Group on the pretext of using Madhucon Group’s equipment and manpower,” he said.
The funds reverted to Madhucon Group and the ED said it identified direct misappropriation of Rs 361.29 crore of the loan funds.
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