The Serious Fraud Investigation Office (SFIO) Thursday arrested Neeraj Singal, former promoter and managing director of Bhushan Steel Ltd, for allegedly siphoning over Rs 2,000 crore from bank loans using more than 80 associate companies.
Singal was sent to judicial custody until August 14. Bhushan Steel has been acquired by a Tata Group company under the Insolvency and Bankruptcy Code. It was among 12 large stressed assets the Reserve Bank of India had referred to the National Company Law Tribunal for resolution last year.
Singhal was arrested under Section 447 of the Companies Act, 2013 which deals with punishment for fraud. Under this law, any person found to be guilty of fraud can be jailed for a minimum of six months to a maximum of ten years, and liable to fine equal to minimum of the amount involved in the fraud, but which may extend to three times the amount involved in the fraud. In case fraud involves public interest, minimum imprisonment is three years.
“This arrest was made as part of the investigation into the affairs of Bhushan Steel Limited (BSL) and its several Group Companies by SFIO. The investigation was assigned by the Ministry of Corporate Affairs to SFIO, based on complaints received from various sources,” the government said in a statement.
The SFIO investigation found that the erstwhile promoters of Bhushan Steel Ltd used “multitude of complex, fraudulent maneuvers to divert/siphon-off funds amounting to thousands of crores raised by the then management of BSL 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 said.
In a tweet separately, the Finance Ministry said the associate companies were used for fraudulent activity of rotation of funds through bogus loans and advances and investments. “Fraudulent activities contributed to the company becoming insolvent. Bhushan Steel Limited is one of the 12 big cases that had been referred for insolvency resolution by banks. Tata Group has taken-over management of the company from the Singals. SFIO investigation is on-going,” the ministry said.
The erstwhile promoters and directors of BSL, the government said, have not been cooperating with the investigation until now. Apart from failing to appear before the investigation team, material facts were also concealed, the government said.
Acquisition of Bhushan Steel by a Tata Group company was the first large case of resolution under the Insolvency and Bankruptcy Code (IBC). In May, Bamnipal Steel Ltd (BNPL), a wholly-owned subsidiary of Tata Steel, acquired controlling stake of 72.65 per cent in Bhushan Steel Ltd for around Rs 36,400 crore.
A new management has taken over the company. The total claims of financial creditors were Rs 56,018 crore and that of operational creditors of Rs 843 crore while the liquidation value for Bhushan Steel was Rs, 14,541 crore.
“The arrest has been made by in exercise of the powers under Section 212(8) of the Companies Act, 2013, based on the material in its possession which has revealed that Neeraj Singal is guilty of indulging in serious corporate fraud punishable under Section 447 of the Companies Act, 2013,” the government said.