BPSL acquired Rs 27,559-crore assets by diverting loans: ED

NEW DELHI: The Enforcement Directorate (ED) has alleged that Bhushan Power & Steel Ltd (BPSL) acquired assets worth Rs 27,559 crore during a period when funds out of loans received from banks were “diverted and routed back as equity” by the company.

As per its probe report, accessed by ET, the agency has said BPSL acquired land valued at about Rs 361 crore, made addition of buildings valued at Rs 7,473 crore and plant and machinery of Rs 19,725 crore between 2011 and 2017.

The funds infused as equity capital by the Singals and associated promoter companies were sourced from bank loans that were illegally diverted, the ED said. ET, on Saturday, reported that the ED told a local court that it was probing a Rs 47,000-crore fraud involving the company and its promoters.

The agency has so far attached land, building and equipment valued at Rs 4,025 crore, terming those to be “proceeds of crime”.

Sources told ET that unknown public servants of banks and others were also under the scanner for allegedly cheating banks and the government exchequer by conniving with BPSL promoters.

It accused the Singal family of diverting “huge amount of bank funds through companies/shell companies/entities” and “deliberately” defaulting on repayments. Former BPSL chairman Sanjay Singal was arrested by the ED last week. He is currently in ED’s custody.

On October 3, during his questioning, Singal was asked to explain the “circular nature” of transactions adopted by BPSL involving bogus invoices, transporters and entry operators, the agency has said in the report.

To this, Singal told the agency that BPSL had been allotted two coal mines near its Jharsuguda plant in Odisha, and the company had invested a huge amount of money in development of these mines.

“However, subsequently, these allotments were cancelled. Further, two iron ore mines were also agreed upon as per a memorandum of understanding by the state government; however, it was never recommended by the state government. Due to this, the company was not able to have captive raw material. These circumstances led to financial hardship for the company, and in order to maintain a healthy debt-equity ratio, the company resorted to these circular transactions for introduction of equity,” Singal said, according to the probe report.

The ED, in May, had reached out to the Central Bureau of Investigation and the Director General of GST Intelligence before summoning Singal. As per its initial investigation, Rs 2,348 crore were diverted from five bank accounts of BPSL.

The ED has zeroed in on nearly two dozen entities which allegedly helped BPSL commit fraud by issuing fake purchase invoices.

The agency has recorded statements of the owners of these entities. One of them revealed a key role played by an alleged middleman between BPSL and these entities. The middleman has also been questioned and allegedly admitted to facilitating the fraud, the ED report said.

As first reported by ET on October 19, Singal, in his testimony to the ED, had said Rs 3,330 crore were 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 had 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 from 2011-12 to 2016-17.

The outstanding defaulted amount by BPSL as on January 30, 2018, was Rs 47,204 crore. It is alleged that BPSL availed of loan facilities from 33 banks and financial institutions between 2007 and 2014. The lead bank was Punjab National Bank, and the loans were taken for different purposes, such as working capital, purchase of plant machinery, etc.