BPSL CMD diverted funds to arrange tax-free income: ED

NEW DELHI: Sanjay Singal-led Bhushan Power and Steel Ltd allegedly used a large number of people operating shell companies to provide accommodation entries — the process of layering and breaking large amounts into smaller sums to avoid suspicion — and for arranging tax-free income in the form of long term capital gains (LTCG), according to the Enforcement Directorate.

The ED charge sheet filed on Friday through special public prosecutor Nitesh Rana against Singal and 24 others, explained how Singal, the chairman and managing director of BPSL, allegedly transferred money to shell companies under the guise of buying capital goods, then either routed the money back to BPSL as equity so as to borrow more money from banks or laundered it to buy property. HT has reviewed the ED charge sheet.

The charge sheet says that Singal asked a Delhi-based stock broker to help him create LTCGs. The broker approached several so-called entry operators — people who handle shell companies — in Mumbai and Kolkata, the ED’s probe showed. One of the entry operators arranged preferential allotment of shares of M/s Prraneta Industries Ltd at about ₹10 per share face value, ED said.

Singal paid the purchase price by way of cheque/RTGS/NEFT in favour of Prraneta and the entry operator, while retaining a fixed commission amount, returned the remaining money in cash or one-time “accommodation entry” through another company, the charge sheet added.

The charge sheet said the entry operator, with the help of other brokers in Mumbai, artificially raised the price of the share at the stock exchange by trading in small volumes at higher prices within the select group of brokers. Within a year, the price of a share, having a face value of ₹10, would be raised to between ₹200 and ₹300 per share. Then, these shares were sold in small quantities over a period of time to avoid any suspicion, according to ED.

ED added that the buyer would make payments to Singal through banking channels. Singal would then pay the equivalent amount in cash through the Delhi-based stock broker to the buyer who paid for the share through banking channels and reflect the income as tax-free LTCG in his income tax return, the charge sheet said.

BPSL lawyer Vijay Aggarwal refused to comment.

Both the Delhi-based stock broker and the entry operator have been named in the charge sheet. The agency has named at least 12 shell companies run by entry operators for providing long-term entries to various businessmen. In all, the agency said in its charge sheet that it has established diversion of funds of around ₹4,025 crore by Singal using different modus operandi.

A property worth ₹162 crore in plush One Hyde Park in London and a bungalow in Delhi’s Jor Bagh worth ₹74 crore, purchased from the tainted money, was attached by the agency on January 16. HT first reported on Saturday that Singal bought these prime properties allegedly using the ill-gotten money.