ED arrests managing director of Hyderabad-based firm in Rs 402 crore money laundering case

The Enforcement Directorate has arrested Avasarala Venkateswara Rao, managing director of Hyderabad-based Servomax India Private Limited, under the Prevention of Money Laundering Act in a bank fraud case of Rs 402 crore. 

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The Enforcement Directorate
The Enforcement Directorate has arrested Avasarala Venkateswara Rao in a bank fraud case of Rs 402 crore. (Photo: File)

The Enforcement Directorate has arrested Avasarala Venkateswara Rao, the promoter and managing director of Hyderabad-based Servomax India Private Limited (SIPL), under the Prevention of Money Laundering Act (PMLA) in a bank fraud case of Rs 402 crore.

The ED had initiated its investigation on the basis of an FIR lodged by the Central Bureau of Investigation against SIPL.

According to the ED, SIPL had taken loans from a consortium of banks when Avasarala Venkateswara Rao was the promoter and key managerial person in the company. He was then responsible for the entire business operations.

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“He allegedly indulged in fraudulent transactions and the loan amounts were not repaid. The consortium of banks suffered a loss of Rs 402 crore. SIPL had circulated loan amounts to various related entities to inflate its books of accounts in order to become eligible for higher loans. The company had issued LCs [Letters of Credit] to related entities without any real purchase of goods, which ultimately devolved and caused losses of Rs 267 crore to the banks,” the ED said in a statement.

ED officials have alleged that Avasarala Venkateswara Rao continuously indulged in benami transactions and diverted loan funds for personal benefit. He allegedly used a web of more than 50 entities to route proceeds of crime and layer the same.

“He was non-cooperative during the investigation and was not supplying documents of his own business entities on one pretext or the other. Once the loan accounts became non-performing assets, he was using his own shell entity [with his employee as controlling director] to initiate the CIRP [Corporate Insolvency Resolution Process] by fraudulently declaring it to be a creditor and passing bogus journal entries,” the statement added.

A designated court in Hyderabad sent him to judicial custody for 14 days on Tuesday.

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