ED arrests US, Vanuatu, Indian citizens in IPO 'scam' linked money laundering case

New Delhi: The Enforcement Directorate on Friday said it has arrested three persons -- a resident of the US, one of Vanuatu and an Indian -- as part of a money laundering probe linked to an alleged IPO scam worth crores of rupees in Hyderabad.

Pavan Kuchana, a resident of the US, Nirmal Kotecha, a resident of the Republic of Vanuatu, and Kishore Tapadia were taken into custody under the provisions of the Prevention of Money Laundering Act (PMLA) on October 11.

They were produced before a special court in Hyderabad on Thursday that sent them to ED custody till October 25.

The money laundering case stems from a complaint filed by the Securities and Exchange Board of India under the Sebi Act of 1992 against Taksheel Solutions Limited, its promoters and directors and others for irregularities with respect to the IPO of 55,00,000 shares of Rs 10 each for which issue price was fixed at Rs 150 and through which Taksheel raised Rs 80.50 crore, the agency said in a statement.

Pavan Kuchana, Nirmal Kotecha and Kishore Tapadia 'formulated a meticulously planned strategy to inflate the revenue of Taksheel Solutions Limited for issuing IPO and for subsequently diverting and siphoning off the IPO proceeds'.

To facilitate the issuance of the IPO, Nirmal Kotecha arranged Inter-Corporate Deposits (ICDs) of Rs 34.50 crore to Taksheel Solutions Ltd, the ED said.

The said funds were 'rotated' through US-based entities belonging to Pavan Kuchana and circular transactions were done with Taksheel Solutions Ltd. before the IPO which resulted in 'incremental revenue' and corresponding inflation of profitability, the agency claimed.

After the IPO, the ICDs were repaid from the IPO proceeds, it said.  Out of the IPO proceeds of Rs 80.50 crore, an amount of Rs 34.50 crore was 'diverted and siphoned off' to US-based entities of Pavan Kuchana on the pretext of payment for supply of services, the ED alleged.

From these US-based entities, Rs 30.50 crore was further 'transferred' to Singapore and Hong Kong-based entities under the control of Nirmal Kotecha.

The agency said that out of the IPO proceeds, Rs 23 crore was transferred to Indian entities in the guise of the purchase of software products and was eventually transferred to Nirmal Kotecha's entities based in Hong Kong and Dubai. 

"Proceeds of the crime of Rs 18 crore were transferred from Taksheel Solutions Ltd. to various individuals/entities on the pretext of IPO-related expenses, payments to vendors, STPI development expenses, salaries, etc," the ED said.