Bank fraud: ED arrests Shakti Bhog CMD in money laundering case

Shakti Bhog Foods Ltd Chairman and Managing Director Kewal Krishan Kumar has been arrested by the Enforcement Directorate (ED) in a money laundering case arising out of a Rs 3,269.42 crore bank loan fraud case.

Kumar was taken into custody on Sunday and produced before a special Prevention of Money Laundering Act (PMLA) court, which sent him to ED custody till July 9, a statement said.

The arrest came following searches at nine premises in Delhi and Haryana. "During the searches, various incriminating documents and digital evidences have been recovered," the ED said.

The ED said it initiated the case on the basis of an FIR registered by the CBI against Kumar and others on charges of conspiracy, cheating and criminal misconduct.

The allegations against Kumar included diversion of funds from loan accounts by round tripping of funds through related entities. Siphoning of funds was allegedly being done by way of suspicious sale/purchase from various entities, it said.

The CBI FIR came following investigations into a complaint filed bySBI against the company claiming that the the Directors allegedly falsified accounts and forged documents to siphon off public funds.

Over its long history, the SBI said in its complaint, the company has usually ventured only into related diversification and increased its product portfolio only in the food processing sector. This helped the company grow organically over the past dcade and its turnover grew from Rs 1,411.87 crore in 2008 to Rs 6,000 crore by 2013-14, the SBI had said.

However, the account turned into a Non-Performing Asset (NPA) and it was declared a fraud in 2019.

The 24-year-old company, which is into manufacturing and selling wheat, flour, rice, biscuits, cookies etc., had grown organically as it ventured into food-related diversification over a decade with a turnover growth of Rs 1,411 crore in 2008 to Rs 6,000 crore in 2014, the bank had said.

The ED said the "allegations against the accused include diversion of funds from loan accounts by round-tripping through related entities and siphoning of funds was being done by way of suspicious sale/purchase from various entities."

The bank report to the CBI said the turnover growth of the company came to an abrupt halt in 2015 with the account turning into a Non-Performing Asset (NPA) and it was ultimately declared a fraud in 2019.

The account turned an NPA on account of inventory losses owing to a steep fall in paddy prices, under-utilisation of capital expenditure in the rice and paddy segments and a delay in the tie-up funds to tide over losses, an investigation report by the bank on staff accountability had noted in 2017.

A forensic audit done by the bankers pointed out that the company, in its account books of financial year 2015-16, showed that its inventory worth over Rs 3,000 crore got damaged due to pests and was sold at substantially low prices.

This was contradictory to the stock and receivable audit report, which showed that the company had a stock of over Rs 3,500 crore in September 2015, its warehouses were fully stocked and none of the inventory was obsolete or slow moving, the bank had alleged in its complaint.