The Enforcement Directorate had provisionally attached assets worth ₹96.21 crore belonging to Madhucon group of companies and its directors and promoters in a case of money laundering.
The case of money laundering against Madhucon group of companies was initiated by the ED based on an alleged bank fraud committed by one of the group’s companies, M/s Ranchi Expressways Limited (REL).
The case against REL was registered by the Central Bureau of Investigation (CBI) in 2019, following an allegation that the company misused bank loan amount secured for execution of a contract of laying four-lane national highway road for 163.50 km on the Ranchi-Rargaon-Jamshedpur stretch.
The CBI had also filed a chargesheet in this case on December 30, 2020, in the court of Special Judge for CBI cases in Ranchi against REL and others.
Initially, the NHAI awarded the contract of laying the four-lane road to REL on design, finance, operate and transfer (DBFOT) basis to M/s Madhucon Project Limited on March 18, 2011.
Madhucon group created a Special Purpose Vehicle (a subsidiary company that operates as a separate firm and separate legal entity from its parent company) called REL to execute the work. Kamma Srinivasa Rao, Nama Seethaiah and Nama Prithvi were the founder directors of the said company.
The company failed to execute the work despite availing the full loan amount, the ED said in a statement. Eventually, the contract was terminated. An FIR was issued based on the directions of the court. The reports of the Serious Fraud Investigation Office (SFIO) and NHAI were the basis for the court directions.
After registering the money laundering case in the matter, incriminating evidences along with ₹34 lakh unaccounted sum was seized in 2021 from the residential premises of Madhucon group chairman Nama Nageshwar Rao, the ED officials said. The investigation also disclosed that REL directors and promoters secured loans to the tune of ₹1,030 crore from the consortium of banks led by Canara Bank.
The ED authorities said in the statement that Madhucon group did not use the entire loan amount for the project purpose. It diverted the loan amount to its associated entities and used the money for other works. The money was also siphoned off by giving bogus work to related shell companies.
Due to this, the project could not be completed despite drawing the entire loan amount. “They also managed the maintenance reports and work progress reports to falsely claim higher expenses,” the statement said.
The Madhucon group was not doing well financially when it won the Ranchi-Jamshedpur project and did round tripping of loan funds to show bogus promoter’s investment for obtaining the very first draw-down of the loan amount, the ED authorities said.
The ED had attached the group’s immovable assets of ₹88.85 crore in Hyderabad, West Bengal and Visakhapatnam, Prakasam and Krishna districts in Andhra Pradesh along with movable assets of ₹7.36 crore.
