Chief of firm which owes `3,000 cr to banks held

MONEY LAUNDERING CASE

THE ENFORCEMENT Directorate on Wednesday arrested Vijay Choudhary, promoter and director of Zoom Developers Pvt Ltd, a leading wilful defaulter which owes about Rs 3,000 crore to at least 26 banks. Choudhary was held under section 19 of the Prevention of Money Laundering Act (PMLA).

He was granted a 10 day remand by the PMLA court in Indore which comes under Gujarat jurisdiction.

Chaudhary has also been linked to an offshore trust — Gold Harvest Trust, registered in the British Virgin Islands (BVI), according to an April 2013 investigation by The Indian Express and the International Consortium of Investigative Journalists (ICIJ) on investments by Indians in offshore entities in tax havens. The trust was set up on August 23, 2006 and Choudhary was named intermediary of the trust.

In a statement on Wednesday, the ED said: “The money laundering investigation was conducted in this case on the basis of Fir/chargesheets filed by CBI, New Delhi wherein it is alleged that Vijay Choudhary-controlled Zoom Developers has caused wrongful loss to 5 banks viz. Punjab National Bank, Syndicate Bank, Canara Bank, United Bank of India and Union Bank to the tune of Rs 966 crore. Further, this loss is not just limited to Rs 966 crore but the accused has cheated more than 25 banks and it involves huge public money over Rs 2,650 crore.”

According to ED, Choudhary formed two trusts — Beverin Stifung Foundation and Windleaf Foundation — in Liechtenstein and was the sole beneficiary. Subsequently, Choudhary formed five companies under these trusts in the UK and Switzerland.

These five foreign firms including Astikor AG, Llondenium Trading Ltd entered into contracts and sub-contracts for rendering of engineering services with Zoom Developers as independent firms, the ED said. Zoom Developers, on the basis of these contracts, approached various Indian banks for bank guarantees and counter-guarantees to foreign bankers of the aggregators.

The money raised via guarantees, the ED said, was “utilised by Zoom Developers among their group companies, as investment in share capital for purchase of properties” among others.

“It is observed that majority of the contracts are paper-contracts only (i.e., no physical work/services/supply was ever made against them) and no work was done, Zoom Developers has frequently sought extension of bank guarantees/counter-guarantees, issued by their Indian bankers, submitting false grounds for extension,” the ED said.

Several lenders had issued bank guarantees to the company, allegedly without due diligence, and allowed it to roll over bank guarantees for four years until 2009-10,sourcesfamiliarwiththe case said. While the value of bank guaranteeswasrs3,000crore,the collateral with them was only Rs 150 crore, the sources said.

Zoom Developers’ main business was scrapping a plant and relocating it. In 2004-05, the company, sources said, decided to use five aggregators, mostly from Europe, to get international orders. In this context, aggregators are entities that secure job contracts for a third party.

Zoom used to sign contracts with these aggregators to execute projects for third parties. The aggregators would make advance payments to Zoom and secure this with a bank guarantee from an Indian bank for an equal amount, sources said.

According to ED, Choudhary formed 485 companies in the name of his family and employees. He has 15 companies in US, three in UK, three in Switzerland, seven in Singapore, four in Germany, nine in UAE, and two each in China and Zimbabwe. The ED claimed that Choudhary formed these foreign firms “for the sole purpose of laundering the proceeds of crime”.

So far, the ED has attached assets worth Rs 130 crore of Zoom Developers, including a 1,280 acres of land in California.