Hyderabad: The Enforcement Directorate (ED) has arrested Avasarala Venkateswara Rao, promoter and MD of Servomax India Pvt Ltd (SIPL) on Monday under provisions of the Prevention of Money Laundering Act (PMLA), 2002. He was charged with money laundering and causing a loss of around Rs 402 crore to a consortium of public sector banks through fraudulent practices. A court remanded him to 14 days’ judicial custody.
ED started the investigation on the basis of a CBI FIR against SIPL dated February 2, 2018. It said the investigation revealed that the firm had taken loans from a consortium of banks and Rao was the promoter responsible for the entire business operations. He indulged in fraudulent transactions and the loan amounts were not repaid. The consortium of banks suffered a non-performing asset (NPA) loss of Rs 402 crore.
SIPL had circulated the loan amounts to various related entities to inflate its books of accounts in order to be eligible for higher loans and had issued LCs (letter of credit) to related entities without any real purchase of goods. This ultimately devolved, causing losses ofRs `267 crore to the banks.
ED investigations established that Venkateswara Rao was continuously indulging in benami transactions and had diverted loan funds for personal benefit. He used a web of more than 50 entities to route the proceeds of the crime and layer the same.
“He was non-cooperative during the investigation. Once the loan accounts became NPA, he was using his own shell entity (with his employee as controlling director) to initiate the CIRP (Corporate Insolvency Resolution Process) by fraudulently declaring it to be a creditor by passing bogus journal entries, ED reported.
It said Rao even managed to get his own person appointed as IRP for some time. “During the CIRP process, he controlled the website of the company and diverted work orders to his related entities. Based on the investigations, he was arrested under the provisions of PML Act 2002 for the offence of money laundering and was produced before the PMLA Special Court Hyderabad on Tuesday, officials said.
