The Serious Fraud Investigation Office (SFIO) Thursday arrested Neeraj Singhal, the erstwhile Promoter and Vice-Chairman of Bhushan Steel for allegedly siphoning over Rs 2000 crore from bank loans using more than 80 associate companies.
Singhal has been accused of siphoning off funds of over Rs 2,000 crore from the loans availed by Bhushan Steel using more than 80 companies used for fraudulent activities of rotation of funds through bogus loans and advances, investments, etc.
In a tweet, the Ministry of Finance said fraudulent activities contributed to the company becoming insolvent.
He was produced before Court of competent jurisdiction on Thursday and sent to judicial custody till August 14.
Bhushan Steel is one of the 12 big cases that had been referred for insolvency resolution by banks. The company was referred to the NCLT last year after accumulating over Rs 50,000 crore debt.
In May, Tata Steel completed the acquisition of Bhushan Steel after emerging the highest bidder. JSW Steel was the other interested company. Tata Steel had complained about interference from Bhushan Steel promoters as it began the process of taking over the distressed assets.
This is the first arrest by the SFIO since it was given the power last year in fraud investigations. The SFIO was in August 2017, granted the powers to arrest people for violations of companies law, with the government notifying relevant provisions amid the crackdown on illicit fund flows.
A release from the Ministry of Corporate Affairs said the arrest has been made based on the material in its possession which has revealed that Singal is guilty of indulging in serious corporate fraud punishable under Section 447 of the Companies Act, 2013.
“During the course of the investigation, the team has found that the erstwhile promoters of BSL have used a multitude of complex, fraudulent maneuvers to divert/siphon-off funds amounting to thousands of crores raised by the then management of BSL from Public Sector Banks using its several Associate Companies. This has led to wrongful losses to the banks and other investors in these companies,” the release said.
The erstwhile promoters/ directors have reportedly not been cooperating during the investigation so far. Apart from failing to appear before the investigation team, the material facts were also concealed, according to the release.
Singhal was earlier arrested by the CBI in 2014 in the Syndicate Bank bribery case.