ED seizes Rs 1,000 cr worth assets of Chennai-based firm in PMLA case

New Delhi: The Enforcement Directorate Tuesday said it has seized assets worth Rs 1,000 crore after it recently conducted searches against a Chennai-based company which is alleged to have "fraudulently" acquired coal blocks in Chhattisgarh.

The premises of the accused company -- RKM Powergen Private Limited (RKMPPL) -- and linked persons like Andal Arumugam, S Arumugam and others were raided under the provisions of the Prevention of Money Laundering Act (PMLA), the federal agency said in a statement. It did not say when the searches were conducted.

The money laundering case stems from a CBI case where the accused were charged with "fraudulent" acquisition of the Fatehpur East Coal Block in Chhattisgarh, allocated by the Ministry of Coal for the power sector, it said.

The company or its promoters could not be contacted for a comment.

It was alleged that RKMPPL secured a loan from the Power Finance Corporation (PFC) based on the coal block allocation and a "significant" portion of these funds worth Rs 3,800 crore were "transferred" to a foreign entity named MIPP, which was "controlled" by RKMPPL, for the purchase of the "over-valued" plant and machinery.

RKMPPL, following the coal block allocation, issued 26 per cent of its shares to Malaysia-based Mudajaya Corporation Bhd. and 10.95 per cent to Enerk International Holdings Ltd., both at a premium of Rs 240 per share, the agency said.

In contrast, 63.05 per cent of shares were allotted to RKMPPL at face value. The valuation methodology "lacked" transparency and the chartered accountants and fair valuation assessment was "not applied consistently", the ED said.

It was found that Mudajaya Corporation funded its Rs 240 per share premium by "re-routing" PFC-sanctioned funds intended for equipment procurement from MIIP International, a subsidiary of Mudajaya Corporation, as per the federal agency.

"This effectively resulted in the round-tripping of project funds. An estimated Rs 1,800 crore was systematically routed back to RKMPPL through foreign entities under the guise of equity participation," the agency claimed.

Fixed deposit receipts (FDRs) and mutual funds worth Rs 912 crore were frozen and "key documents" related to immovable properties, collectively valued at about Rs 1,000 crore, were seized during the raids, it said.