India's Enforcement Directorate (ED) is investigating an alleged fraud related to Chadalavada Infratech Limited (CIL) and its executives who are suspected of using letters of credit (L/Cs) to fraudulently obtain the equivalent of US$23 million.

The investigation follows a complaint by State Bank of India (SBI) alleging the siphoning of funds, cheating and criminal conspiracy resulting in loss of public money of the same amount.

Funds diverted

As an engineering, procurement and construction (EPC) contractor engaged in the development of power infrastructure projects, CIL is accused of diverting a major part of its loan funding from SBI for purposes other than those for which it was sanctioned.

Investigators say they have found that CIL was enjoying fund-based and non-fund-based credit facilities from SBI, and its directors conspired with others and misused funds by diverting them into the bank accounts of employees, directors and their family members.

L/C revelations

The ED investigation revealed that a major portion of the L/Cs was issued to entities opened in the names of relatives and employees without any underlying business purpose.

The diverted funds were allegedly used to acquire properties in the name of third parties, directors and family members.

Search operations have led to the recovery and seizure of documents related to properties which are suspected to have been acquired out of criminal proceeds.

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