Loan 'fraud': ED attaches land parcels in Chhattisgarh in PMLA case against insolvent UP firm

New Delhi: The Enforcement Directorate Tuesday said it has attached 73 hectares of agricultural land as part of a more than Rs 7,300 crore bank loan "fraud" linked money laundering probe against a liquidated Kanpur-based company. A total of 86 land parcels measuring a combined 73.34 hectares and located in the Balodabazar-Bhatapara district of Chhattisgarh, worth Rs 31.94 crore, belonging to Shri Lakshmi Cotsyn Limited have been frozen after a provisional order was issued under the Prevention of Money Laundering Act (PMLA), the federal agency said in a statement. "All these properties are registered either in the name of the company or trusted employees and other gullible persons," it said.

The money laundering case stems from a 2021 CBI FIR filed against the company, its CMD Mata Prasad Agarwal, joint MD Pawan Kumar Agarwal, deputy MD Devesh Narain Gupta and director Sharda Agarwal. The Central Bank of India, leader of the 23 banks consortium that lent money to the company, complained to the CBI that these entities, unknown public servants and private persons "committed cheating, criminal breach of trust, criminal conspiracy, forgery, falsification of accounts and criminal misconduct for diversion and misappropriation of public money between 2010-2018". "The case involves an outstanding loan amount of Rs 7,377 crore which has been already declared fraud by RBI and all assets of the accused company -- Shri Lakshmi Cotsyn -- have been liquidated by the Resolution Professional appointed by the National Company Law Tribunal (NCLT)," the ED said.

It said the company approached the banks' consortium for financial assistance in order to manufacture blended suiting and shirting, quilted fabrics, denim fabrics, technical textile fabrics, etc. "Due to non-adherence of financial discipline, the accounts were classified as NPA (non-performing assets) by the complainant banks individually as per IRAC (Income Recognition, Asset Classification and Provisioning) norms. "It was found in the forensic audit that the accused company did not comply with the terms and conditions of the loan agreement," it said. The forensic audit suggested, the ED said, that the company "inflated" inventory records, improperly organised the auction process, and conducted significant sales with undisclosed related parties.

The accused company lacked a formal discount policy but provided significant discounts of Rs 207.29 crore to related parties, potentially undisclosed parties, and customers in different industries, as well as to non-existent customers at the addresses listed on sale invoices, the agency found. Advances to suppliers were written off "without" any supporting documentation, reflecting "diversion and siphoning" off funds in these transactions, it alleged. The ED said the attachment of assets action was undertaken as some funds of the company were "diverted" to its group firm -- Shri Lakshmi Power Ltd. These funds were further "diverted" to individual persons through their ICICI Bank account at Balodabazar and later this money was utilised for "acquiring" immovable properties in the form of land in the name of trusted employees of the company and gullible tribal people of Chhattisgarh, as per the agency. Following the liquidation order issued by the NCLT against the company, assets worth Rs 265.44 crore were sold to realise the debts, it said.