New Delhi: Bhushan Power and Steel misused bank loans to carry out fictitious transactions and route funds to four promoter group entities that had invested in the company, the Enforcement Directorate (ED) said. BPSL made advances to “paper entities” through bank transfers and procured fake transportation documents to project that goods worth several crores of rupees had been ferried to the company’s plant in Odisha, the ED said.
This was done in connivance with owners of steel, iron ore and transport companies to make the fictitious transactions appear lawful, the ED said in its investigation report. The ED had provisionally attached BPSL’s assets last week, a move that was opposed by JSW SteelNSE 0.18 %, which had made a successful bid for BPSL under the insolvency resolution process.
The National Company Law Appellate Tribunal stayed the ED’s order to attach BPSL properties worth Rs 4,025 crore earlier this week, which the agency is considering appealing. The ED, in the report exclusively accessed by ET, said that BPSL chairman Sanjay Singal had devised a “brilliant scheme to dress up the books of accounts” of the company.
“BPSL had devised a peculiar modus operandi to siphon funds obtained as loans from various banks/financial institutions,” the ED said. “Singals did not use the bank funds for the purpose for which the same were sanctioned, committed forgery and falsified accounts, causing wrongful loss to the lending banks.”
In July, Punjab National Bank and Allahabad Bank had accused BPSL’s former promoters and directors of fraud in connection with loans given to the company. The ED said that during his questioning on October 3, Singal admitted to routing the amounts transferred by BPSL to various parties on account of purchase of goods, which never took place.
Singal deposed in his statement that Rs 3,330 crore was routed to the accounts of four companies controlled by him out of the funds diverted from the accounts of BPSL in the shape of advances shown to various parties. It added that Singal conceded that the four companies — Jasmine Steel Trading, Marsh Steel, Diyajyoti Steel and Vision Steel — were promoters of BPSL that were ultimately owned and controlled by him and his family.
The four companies infused Rs 3,330 crore in BPSL in the period from 2011-12 to 2016-17. BPSL has denied the allegations levelled against it. Singal, the report stated, also admitted that “long term capital gains (LTCG) of over Rs 695 crore were artificially generated by his family members and himself and another amount of nearly Rs 700 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.”