The Sandesaras had allegedly floated more than 300 shell and "benami" companies in India and abroad to divert and misuse loan funds.

In a major crackdown, the Enforcement Directorate (ED) has attached movable and immovable properties worth more than ₹4,700 crore in the Vadodara-based Sterling Biotech group bank loan fraud case. The main accused in the case have fled the country.

The action was taken as part of a money laundering probe into an FIR registered against Sterling Biotech Limited, its promoters Nitin and Chetan Sandesara, besides others, in October 2017.

The attached assets include immovable properties of about 4,000 acres, plant machinery, around 200 bank accounts of various companies and accounts of promoters, shares worth ₹6.67 crore and various high-end luxury cars.

It is alleged that several companies promoted by the Sandesara brothers had, on the basis of false and fabricated documents, fraudulently obtained credit facilities of about ₹5,383 crore from various banks, which subsequently turned non-performing assets (NPA). The loans were sanctioned by a consortium of banks led by Andhra Bank and comprising UCO Bank, State Bank of India, Allahabad Bank and the Bank of India.

Till date, the banks have declared as fraud the various outstanding loan accounts in respect of the Sterling Group, including Sterling Biotech, Sterling Port Limited, PMT Machines Limited, Sterling SEZ and Infrastructure Ltd and Sterling Oil Resources Limited.

Non-bailable warrants issued

During the course of the ongoing money laundering investigation, non-bailable warrants were issued against several persons, including Nitin and Chetan Sandesara.

The Sandesaras had allegedly floated more than 300 shell and benami companies in India and abroad to divert and misuse loan funds.

The modus operandi of money laundering involved the formation of shell/benami companies, manipulating balance sheets, inflating turnovers and insider shares trading. These companies were controlled by the Sandesaras through dummy directors, who were or are employees of the various companies of the Sterling Group, it is alleged.

Bogus sale/purchases were shown between the benami companies and the Sterling group firms to divert loan funds and inflate turnovers to obtain further loans from banks. Bogus transactions were also allegedly shown between the benami entities and the Sterling group companies to divert loan funds and inflate turnovers to obtain further loans. The funds so raised were rotated in multiple layers to conceal the source of such funds.

A major breakthrough in the case came when the ED successfuly recovered truckloads of material connected to the formation and management of the shell and benami companies, such as original chequebooks, rubber stamps, company seals, original property documents, original PAN cards, and more than 10 lakh pages of other incriminating documents, according to the ED.

Material seized from room in Mumbai

This material were seized from a room in Jogeshwari (East), Mumbai, where it was shifted from various premises and was being concealed to evade seizure. The ED has carried out more than 50 searches at various premises in multiple cities, including Delhi, Mumbai, Vadodara, Ahmedabad and Surat, in connection with the case.

The siphoned off loan funds were used to buy properties in the names of various companies, to purchase shares of Sterling Biotech and Sterling International Enterprises to attract "market fancy" and project a healthy picture of the companies. Luxury vehicles were bought and a total of ₹140 crore was withdrawn from bank accounts of various shell/benami companies. Some of these companies have been identified as Dipraj trading, Embio Trading, Gatsby Trading, Newport Enterprise and Raj Bones.

"Some of the diverted loan funds were also paid to public servants. The ED is investigating this aspect of the case. It is also investigating various cross-border transactions undertaken by group," said an official.

The Sandesaras are into oil business and own several rigs, barges and oilfields across Nigeria. They also have several business concerns in Mauritius, the United Arab Emirates, British Virgin Islands, Seychelles and the United States, among other countries. More than 50 foreign bank accounts and several other assets and properties situated abroad, related to the Sterling Group, are also under the scanner.

In this case, the ED has so far arrested three persons, including Delhi-based businessman Gagan Dhawan, Anup Garg Ex-Director of the Andhra Bank (Chartered Accountant) and Rajbhushan Dixit, director of Sterling Biotech. The ED has also filed multiple charge-sheets.