New Delhi: The Enforcement Directorate (ED) has arrested Avasarala Venkateswara Rao, Promoter and Managing Director of Hyderabad-based Servomax India Private Limited (SIPL) for his alleged involvement in offences of money laundering, the agency said on Tuesday.
Rao was arrested on Monday under the Prevention of Money Laundering Act (PMLA), 2002 for the offence of money laundering and causing a loss of around Rs 402 crore to a consortium of public sector banks by indulging in various fraudulent practices.
ED initiated investigation on the basis of a Central Bureau of Investigation (CBI) FIR registered on February 2, 2018 under various charges of Indian Penal Code against SIPL.
Investigation by ED revealed that SIPL had taken loans from a consortium of banks and Avasarala Rao was the promoter cum key managerial person who was responsible for the entire business operations and he indulged in fraudulent transactions and the loan amounts were not repaid and the consortium of banks suffered a Non-Performing Asset of Rs 402 crore.
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.
ED investigation established that Rao was continuously indulging in benami transactions and had diverted loan funds for personal benefit.
“He 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,” said the ED.
Once the loan accounts became NPA, Rao 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.
The ED said that Rao even managed to get his own person appointed as IRP for some time. “Rao 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.”
Based on the investigation done till date and the material evidence available on record, Rao 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. The court has remanded him to 14-day of judicial custody.