This is the first arrest made by SFIO in any corporate fraud case, marking government crackdown on corporate wrongdoings that has landed banks in a massive bad loans situation. Singal has been accused of siphoning off more than Rs 2,000 crore from the loans availed by Bhushan Steel.
Tata Steel took control of Bhushan Steel on May 18 under insolvency proceedings after settling nearly two thirds or Rs 35,200 crore the steel company owed to banks. The SFIO in its investigation found that Singal used more than 80 companies for rotation of funds through bogus loans, advances and investment, the corporate affairs ministry said in a statement. “Fraudulent activities contributed to the company becoming insolvent.
He is accused to be guilty of siphoning off funds of over Rs 2,000 crore from the loans availed by Bhushan Steel Limited using more than 80 companies,” the finance ministry said in a tweet.
Singal was produced before the court on Thursday and has been sent to judicial custody till August 14. “This arrest was made as part of the investigation into the affairs of Bhushan Steel Limited and its several group companies by SFIO. The investigation was assigned by the ministry of corporate affairs to SFIO based on the complaints received from various sources,” the statement said.
“The investigation by SFIO revealed that Singal is accused guilty of indulging in serious corporate fraud punishable under Section 447 of the Companies Act, 2013.” Bhushan Steel was among the 12 companies referred for insolvency resolution by the Reserve Bank of India.
The government said promoters of Bhushan Steel used multitude of complex, fraudulent manoeuvres to divert funds amounting to thousands of crores raised by the then management of Bhushan Steel 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 government statement said.
The fraud investigation agency said that former promoters and directors of Bhushan Steel were not cooperating during the investigation and also concealed the material facts. “The powers to make arrests was notified as a part Companies Act 2013 in August last year.
This is the first arrest made by the agency. The investigative agency is still probing the case and more arrests could be made soon,” a senior government official said. In May this year, Bamnipal Steel Ltd, a wholly owned subsidiary of Tata Steel, had acquired controlling stake of 72.65% in Bhushan Steel by settling about Rs35,200 crore of debt.
Here is the official statement from SFIO:
Serious Fraud Investigation Office (SFIO) arrests Mr. Neeraj Singhal in connection with investigation into the affairs of Bhushan Group of Companies
New Delhi, dated the 9th August, 2018
Shravana 18, 1940
Mr. Neeraj Singal, erstwhile Promoter and Managing Director of Bhushan Steel Limited was arrested by the Serious Fraud Investigation Office (SFIO). He was produced before the court of Competent Jurisdiction today and was sent to Judicial Custody till 14thAugust, 2018.