AHMEDABAD: The Enforcement Directorate has filed a chargesheet in a money-laundering case involving an alleged bank fraud of Rs 28.54 crore, accusing a stainless-steel trading firm and its directors of diverting loan funds through bogus transactions and falsified records.
A Loan for Steel, and Questions of Intent
The company at the center of the case was incorporated with a stated purpose that reflected India’s industrial backbone: trading in stainless steel — sheets, coils, plates and fittings — and manufacturing pipes and tubes made from the alloy. On paper, it was a business positioned squarely within the country’s expanding infrastructure and construction supply chain.
To finance its operations, the firm secured a credit facility totaling Rs 29.67 crore from the Bank of Baroda. The loan was meant to support legitimate commercial activities tied to its declared line of work.
But according to investigators, the company’s operations diverged sharply from its stated objectives. The Enforcement Directorate, or ED, alleges that the firm and its directors defrauded the bank by diverting funds and submitting falsified financial documents in order to obtain and retain the credit.
The agency’s prosecution complaint, filed in a special court under the Prevention of Money Laundering Act (PMLA), lays out a sequence of transactions and representations that it contends were designed to mislead the bank about the company’s financial health and business activity.
At the heart of the allegations is the claim that the company caused a wrongful loss of Rs 28.54 crore to the Bank of Baroda.
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Bogus Letters of Credit and Falsified Accounts
Investigators say the company issued bogus Letters of Credit to banks in order to avail itself of loan funds. Letters of Credit are typically used in trade finance to guarantee payment between buyers and sellers, particularly in large commercial transactions. In this case, the ED alleges that the instruments were not backed by genuine underlying trade.
The directors, according to the complaint, deliberately submitted falsified stock statements and manipulated books of accounts. These documents, prosecutors say, misrepresented the company’s inventory and financial standing.
The intent, the agency alleges, was to create the appearance of legitimate business activity while siphoning off bank funds.
The ED contends that the loan money was diverted and siphoned to sister concerns without any genuine business transactions to justify the transfers. Those sister companies are named in the complaint and form part of what investigators describe as a network through which funds moved after being disbursed by the bank.
The prosecution complaint names not only the company but also its directors and several associated entities, including SLS Stainless Pvt. Ltd., Eckhardt Engineering Pvt. Ltd., Zenith Strips Ltd., and Scorodite Stainless India Pvt. Ltd., as well as individuals identified as Hitesh Sanghvi, Pradeep Sanghvi and Rajesh Karwasra.
The ED alleges that these entities and individuals were involved in the diversion of funds, though the complaint’s detailed evidentiary basis will be examined in court proceedings.
Properties Attached Under PMLA
In December 2024, the Enforcement Directorate provisionally attached immovable properties valued at Rs 19.37 crore under the provisions of the PMLA. The attached assets include commercial land located in Rajula in the Saurashtra region and a residential flat in Ahmedabad.
Attachment under the PMLA is a provisional measure, intended to prevent the disposal or transfer of assets believed to be linked to proceeds of crime. The order signals the agency’s assessment that the properties were acquired, directly or indirectly, from funds generated through the alleged fraud.
The attachment forms part of the broader money-laundering investigation that runs parallel to the underlying criminal case concerning bank fraud and cheating.
The ED’s action follows an earlier investigation by the Central Bureau of Investigation (CBI), which registered a First Information Report (FIR) against the company and others, alleging criminal conspiracy and cheating under Sections 120B and 420 of the Indian Penal Code, as well as violations under the Prevention of Corruption Act.
According to officials, the CBI filed a chargesheet in December 2021, alleging that the company and its directors, identified as Shantilal Sanghvi and Mahesh Sanghvi, cheated the bank.
From CBI Chargesheet to ED Prosecution
The ED initiated its probe on the basis of the CBI’s FIR. Under Indian law, money-laundering investigations are often predicated on the existence of a scheduled offense — in this case, the alleged bank fraud and criminal conspiracy outlined by the CBI.
After examining financial records, bank documents and related transactions, the ED concluded that the alleged fraud amounted to laundering of proceeds of crime under the PMLA.
Earlier this week, the Enforcement Directorate’s Ahmedabad Zonal Office filed its chargesheet — formally known as a prosecution complaint — before the special PMLA court in Ahmedabad. The complaint names Hellios Tubealloys Pvt. Ltd. and its directors in connection with the alleged laundering of Rs 28.54 crore tied to the Bank of Baroda.
The agency asserts that the company misused the credit facility by routing funds through related entities without any corresponding business activity. It contends that the transactions were structured to give the appearance of legitimate trade while diverting bank funds for other purposes.
The filing of the prosecution complaint moves the case into the judicial phase under the PMLA framework. The special court will now determine whether to take cognizance of the complaint and proceed with trial.
The accused company and its directors have not yet publicly responded in court to the ED’s allegations. As the case advances through the judicial process, the prosecution will be required to substantiate its claims regarding diversion of funds, falsified records and the alleged layering of proceeds through associated firms.
For now, the charges remain allegations, detailed in a complaint that outlines a narrative of trade finance instruments, corporate structures and the movement of tens of crores of rupees through what investigators describe as a web of non-genuine transactions.
