Sandesara scam: Amid war within CBI, Enforcement Directorate files chargesheet in Sterling Biotech case; describes "criminal motive of defrauding banks"

The Enforcement Directorate on Tuesday filed a chargesheet in the Sterling Biotech case in a special PMLA (Prevention of money laundering Act) court in New Delhi. The agency had in August 2017 filed a case of money laundering against the company, the same month in which the promoters of the group, Nitin and Chetan Sandesara, fled the country.

The announcement of the prosecution complaint being filed by the agency has been accessed by Republic TV:

The Sterling Biotech group bank loan fraud case relates to the promoters of the group, Nitin and Chetan Sandesara, and others fraudulently availing credit worth thousands of crores (the above notification says Rs 8100 crore) sanctioned by a consortium of banks, that turned NPA. The Sandesaras, who fled the country in August 2017, had allegedly used hundreds of shell companies in India and abroad to divert and misuse loan funds. The ED has attached assets including immovable properties and plant machinery, along with high-end cars, in the case. In November, Delhi-resident Gagan Dhawan, an alleged close aide of Ahmed Patel had been arrested by the ED in connection with the case on charges of money laundering.

In the above notification, the ED spells out the details of the investigation into the case:

Investigation in ED revealed that Sandesaras and others hatched a criminal conspiracy for dishonestly cheating banks. They manipulated figures in the balance sheets of their flagship companies and induced banks to sanction higher loans. After obtaining loans, they diverted the loans funds to non-mandated purposes through a web of shell companies. Thus, the loan funds were diverted, layered and laundered by the promoters for their personal purposes. Total amount of loan fraud as on dateis Rs 8,100 crore. The loan fraud pertains to domestic as well as offshore branches of Indian banks. 

 Who has the chargesheet been filed against:

Prosecution complaint has been filed against 191 accused persons including 7 individuals and 184 companies. Individuals include: Sterling group promoters Nitin Sandesara, Chetan Sandesara, Dipti Sandesara, Rajbhushan Dixit, Hitesh Patel, their chartered accountant Hemant Hathi and middleman Gagan Dhawan. Companies include the group's flagship companies and 179 shell companies.

The modus operandi of the Sandesara scam:

"To fulfill their criminal motive of defrauding banks, the promoters devised a multi-layered strategy of cheating whereby they not only cheated banks but also cheated revenue department as well as the share-holders. Their strategy included incorporation of shell companies, conducting circular transactions to artificially inflate turnover of flagship companies, claiming higher depreciations of non-existing machinery, artificial share trading with the use of shell companies, layering and laundering of proceeds of crime within India and abroad through the web of shell companies."

"The proceeds of the crime were knowingly rotated, layered and finally integrated into the financial system and projected as untainted. The so projected proceeds of crime were found invested in the form of immovable properties purchased in the names of shell companies, luxury vehicles and jewellery/watches purchased in the names of the promoters and other key persons."

"Cash was also used for the bribing of public officials. The investigation in this aspect is under process."

READ | Sterling Biotech Case: Did Ahmed Patel Know A 'cash Courier' Delivered Rs 25 Lakh At His Address?

Interestingly, the chargesheet by the ED comes against the backdrop of the ongoing top-level internal war in the CBI, in which Director Alok Kumar and special director Rakesh Asthana have each made allegations against the other. In a letter by Asthana to the CVC alleging that Alok Kumar had been paid illegal gratification to scuttle an ongoing probe, he had sought the transfer of two Sandesara scam cases, into which he was leading the investigation before a case was filed against him by the CBI, to the SIT.