New Delhi, Jan 18 The Enforcement Directorate (ED) on Tuesday said it has arrested Avasarala Venkateswara Rao, Promoter and MD of Servomax India Private Limited (SIPL), in connection with a money laundering case of Rs 402 crore.
A senior ED official said Rao has been accused of indulging in the offence of money laundering and causing a loss of around Rs 402 crore to a consortium of public sector banks.
He had allegedly indulged in various fraudulent practices and cheated the banks.
Earlier, a case against him was lodged by the Central Bureau of Investigation (CBI), under sections 120-BA 406, 468 and 471 of IPC against SIPL.
The ED initiated the money laundering probe on the basis of the FIR of the CBI.
The ED's investigation has revealed that SIPL had taken loans from a consortium of Banks and Avasarala Venkateswara Rao was the promoter cum key managerial person who was responsible for the entire business operations.
But Rao indulged in fraudulent transactions and the loan amounts were not repaid intentionally.
"SIPL had circulated loan amounts to various related entities to inflate its books of accounts to become eligible for higher loans and had issued LCs to related entities without any real purchase of goods and which ultimately devolved causing losses of Rs 267 crore to the banks," said the ED official.
The ED's investigation established that Avasarala Venkateswara Rao was continuously indulging in benami transactions and had diverted loan funds for personal benefit.
Rao has used a web of more than 50 entities to route proceeds of crime and layer the same. He was non-cooperative during the investigation and was not supplying documents of his own business entities on one pretext or the other.
"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) process by fraudulently declaring it to be a creditor by passing bogus journal entries. He even managed to get his own person appointed as IRP for some time. He has also managed to retain the brand name of 'Servomax' illegally and even during the CIRP process, he controlled the website of the company and diverted work orders to his related entities," the ED official said.
Based on the investigation done till date and the material evidence available on record, we arrested Rao under the provisions of PML Act for the offence of money laundering. Rao was produced before the PMLA Special Court Hyderabad which has remanded him to 14 days judicial custody.
Further investigation is going on.
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