The Enforcement Directorate (ED) has arrested three accused in a case alleging that DJW Electric Power Projects Private Limited fraudulently took loans from various entities.

Those arrested have been identified as two company directors, Dandamudi Venkateswara Rao and D. Shanthi Kiran, and Mr. Rao’s brother D. Avanindra Kumar. The ED had secured their custody till May 12 from the court concerned.

The agency has alleged laundering of about ₹284 crore in the matter. Its investigation is based on a case registered by the police in Gurugram, against DJW Electric Power Project. The total loan amount involved in the alleged fraud was about ₹58 crore.

RTGS misused

“...while the accounting records of DJW showed that loans were being repaid to the original lenders, the ED investigation revealed that the banking RTGS system was misused. The RTGS mandate forms fraudulently mentioned the names of actual lenders but provided bank details of Kolkata-based shell entities,” the ED alleged.

As claimed, the loan repayment funds were siphoned off to shell companies including Nexus International, Bhavtarini Sales Pvt. Ltd., and Gabel Trading Co.

The agency said further probe under the Prevention of Money Laundering Act (PMLA) led to registration of another case and a parallel money laundering investigation involving Sravanthi Energy Private Limited (SEPL), also controlled by Mr. Rao.

“It was unearthed that SEPL had been fraudulently paying approximately ₹75 lakh per month as ‘consultancy fees’ to a shell entity named Verset Technologies Pvt. Ltd., which had no office or employees and was registered in the name of D.V. Rao’s father-in-law. Through this sham arrangement, ₹89.36 crore was illicitly diverted,” it said.

The ED alleged that simultaneously, SEPL booked bogus purchases of over ₹139 crore through fake invoices from more than 100 shell entities without any supply of goods or services. “These payments were received back in cash by D.V. Rao and his family. The total proceeds of crime identified against D.V. Rao and his family in the SEPL case is about ₹228 crore,” said the agency.

It alleged that Mr. Rao had earlier defaulted on huge amounts to banks, owing to which the SEPL account turned into non-performing asset.

“This compelled the banks to resort to a compulsory One-Time Settlement (OTS), resulting in a loss of more than ₹1,500 crore to the banking system...D.V. Rao was systematically siphoning off funds from the company for his personal enrichment. In this manner, he has defrauded not only the banks but also the investors in the company. Notably, several Public Sector Undertaking (PSU) banks hold minority shares in the company,” the ED said.

Earlier, during searches, the ED had seized gold and diamond jewellery valued at about ₹5 crore and multiple luxury vehicles. It has also provisionally attached assets worth close to ₹24 crore.