The Enforcement Directorate (ED) has arrested Avasarala Venkateswara Rao, Promoter and Managing Director of Servomax India Private Limited (SIPL) on money laundering charges for causing a loss of around Rs 402 crore to a consortium of Public Sector Banks by indulging in various fraudulent practices.
The ED had initiated money laundering investigation on the basis of CBI FIR dated February 2, 2018 Indian Penal Code Sections relating to criminal conspiracy, criminal breach of trust, forgery for the purpose of cheating and using forged documents as genuine.
Investigation by ED revealed that SIPL had taken loans from a consortium of banks and Rao was the promoter cum Key Managerial Person who was responsible for the entire business operations. Rao indulged in fraudulent transactions and the loan amounts were not repaid, and the consortium of Banks suffered a non-performing asset (NPA) of Rs 402 crore, the ED said.
The accused firm SIPL had circulated loan amounts to various related entities to inflate its books of accounts to become eligible for higher loans and had issued letters of credit (LCs) to related entities without any real purchase of goods and which ultimately devolved causing losses of Rs 267 crore to the banks, it said.
The ED investigation established that Avasarala Venkateswara 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.
Rao 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) by fraudulently declaring it to be a creditor by passing bogus journal entries.
Rao even managed to get his own person appointed as Interim Resolution Professional (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.
Based on the investigation done till date and the material evidence available on record, he was arrested under the provisions of Prevention of Money Laundering Act and was produced before the PMLA Special Court Hyderabad on Tuesday. The Court has remanded him to 14-day judicial custody.