ED files prosecution complaint against firms owned by ex-BRS MP Nama Nageshwara Rao

Hyderabad: Sleuth of the Enforcement Directorate has filed a prosecution complaint against entities Ranchi Expressway, Madhucon Projects, Madhucon Toll Highway, Madhucon Infra and others under the provisions of the Prevention of Money Laundering Act. The companies are owned by former BRS MP Nama Nageshwara Rao.

The ED took up an investigation based on the complaint filed by sleuths of the Central Bureau of Investigation Ranchi, against Ranchi Expressways Limited (REL) and its directors.

What is the fraud?

NHAI had awarded a project of 4-laning of NH-33 on the Ranchi-Rargaon-Jameshdpur section to Madhucon Project Limited.

A Special Purpose Vehicle (SPV) Ranchi Expressway Limited was incorporated by Madhucon Group, to execute this project. Madhucon Project Limited was the Engineering Procurement Construction (EPC) contractor of the project.

Madhucon Group could not complete the project despite availing the full loan amount, and subsequently, their contract was terminated and an FIR was registered based on the directions of the Jharkhand High Court.

ED investigation revealed that REL obtained loans of Rs 1030 crores from a consortium of banks led by Canara Bank. However, Madhucon Group did not utilise the entire loan amount for the stated purpose and diverted it to its associated entities for utilisation in other works and also siphoned off the loan by giving bogus works to its related shell entities.

The work on the ground suffered and they could not complete the work despite drawing the entire loan amount. They also managed the maintenance reports and work progress reports to falsely claim higher expenses. The financials of the group were not doing well for many years and after winning the tender for the Ranchi-Jamshedpur Project, Madhucon Group created an SPV namely REL and did round tripping of loan funds to show bogus investment by promoters. Eventually, Madhucon Group could not repay the loans and the loan account turned into NPA.

Loan funds siphoned

ED investigation also revealed that Madhucon Group’s promoters siphoned off the loan funds by taking the entire EPC contract from its SPV and then diverting huge mobilisation and material advances for their other projects.

Loan funds were also diverted to sub-contractors/shell entities controlled by them and cash amounting to Rs 75.50 crores was received back from them. These sub-contractors did not do the work required, had no sufficient expertise and were based in Andhra Pradesh/Telangana, whereas the project was in Jharkhand.

They took large advances from the Madhucon Project out of the loan funds and then re-routed the funds to the Madhucon Group on the pretext of using their equipment and labour. Diversion of loan funds of Rs 365.78 crores has been identified during the PMLA investigation to date.

ED had earlier conducted searches in the case and seized incriminating evidence and unaccounted cash of Rs 34 Lakhs. ED had also attached 105 immovable properties and other assets worth Rs 96.21 crores belonging to the Madhucon Group of companies and their directors. Further investigation is under progress.