ED arrests Mandhana Industries ex-CMD in ₹975 crore bank fraud case

The Enforcement Directorate arrested businessman Purushottam Mandhana in a ₹975 crore bank loan fraud case against Mandhana Industries Limited.

MUMBAI: The Enforcement Directorate (ED) on Thursday arrested businessman Purushottam Mandhana, the ex-chairman and managing director (CMD) of the erstwhile Mandhana Industries Limited (MIL), as part of its money-laundering investigation into an alleged ₹975 crore bank loan fraud case against the MIL and others.

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Mandhana was produced before a special court (Prevention of Money Laundering Act) in the city on Friday that remanded him to ED’s custody for six days. MIL, which was a textile and garment manufacturing company, is currently liquidated.

The agency’s probe under the provisions of the Prevention of Money Laundering Act (PMLA) is based on a September 2023 case registered by the Central Bureau of Investigation (CBI)’s Bank Security and Fraud unit, which was initiated on a complaint from the public - sector Bank of Baroda, which led a banks’ consortium.

The Bank of Baroda’s complaint had accused the MIL and others, including Mandhana, Manish Mandhana, Biharilal Mandhana, unknown public servants and others of defrauding the banks’ consortium of ₹975.08 crore. It was alleged in the bank’s complaint to the CBI that MIL and its then directors had conspired to cause loss to the banks and corresponding wrongful gain to themselves by diverting loan funds via fraudulent transactions and circular trading. CBI has yet to file a charge sheet for this case.

ED’s investigation revealed that Mandhana allegedly conspired with other directors of the company, MIL, and caused a wrongful loss to the banks for personal enrichment, agency sources said. ED’s probe revealed allegedly that he had incorporated numerous fictitious entities in the name of his employees and used them for diverting, and layering of the funds of MIL, including the loan funds.

ED’s probe also revealed that the accused allegedly made bogus sales purchases with different entities and diverted funds from the accounts of MIL, including the loan funds, to pay off his personal debts and those of his family members, agency sources said.

The agency had earlier, on June 26 and July 5, carried out search operations in the case that led to the alleged recovery of certain crucial incriminating documents, including multiple property documents, a large number of digital devices, among others. Further, gold jewellery worth around ₹3 crore, high-end cars, including Lexus, Mercedes Benz and multiple expensive watches, including brands like Rolex and Hublot, were also seized/ frozen.

ED’s case probe had earlier revealed that certain alleged suspicious third-party transactions were made to divert funds to the accounts of promoter/ directors and their family members.

“Bogus purchases were booked against payments made to different entities providing accommodation entries in the case, the probe revealed,” an ED source said.