How ED cracked the money flow of Zoom Developers to USA?

Vijay Choudhary, the owner of Zoom Developers Pvt Ltd (ZDPL), was directly and knowingly involved in transferring the amounts received as mobilization advances to the account of SBBJ for purchase of property.

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Picture used for representation purpose only
Picture used for representation purpose only.

Off late, the enforcement directorate (ED) got a big boost after issuing an order for attachment of a 1280 acres of land in California, USA of Zoom Developers Pvt Ltd (ZDPL) in connection with a money laundering case.

ZDPL is a Indore/Mumbai based company, engaged in contract works in areas of engineering and logistics. It has operations worldwide in countries including Germany, France, Italy, UK and Scotland, the US, Canada, and Alaska.

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At present, ZDPL is among the top bank defaulters in India and it owes Rs 3000 crore to 26 public sector banks. ZDPL's dues has become a non-perfoming assets for a bank consortium led by Punjab National Bank - which itself has an exposure of Rs 410 crore as of December 2014.

Vijay Choudhary, the owner of ZDPL had used part of the bank money borrowed for reality projects in Europe. When no project was ever undertaken and the money was allegedly siphoned off, first the Central Bureau of Investigation and later ED swung into action and arrested Sharad Kabra, one of the company's directors few months back.

In the fresh development, the ED action refers to the alleged fund diversion of bank money by Zoom's promoter Vijay Choudhary in 2007 to purchase land in the US for about $40 million. The attached land is valued at about Rs 1,000 crore.

What does attachment order says?

Indiatoday.in has the exclusive copy of provisional attachment order No; 01/2015-16 (INSZO) under PMLA Act, 2002, which states -

-- the accused have knowingly formed various trust and beneficiary companies and projected them as independent entities concealing the relationship between the trust and the foreign companies, which were termed as Aggregators;

-- the accused have directly and knowingly involved in transferring the amounts received as mobilization advances to the account of SBBJ for purchase of property;

-- the accused are actually involved in the process or activity connected with the proceeds of crime and concealed the fact of acquisition of properties from out of the proceeds of crime.

-- the accused are parties in acquiring the subject properties from out of Proceeds of Crime (PoC) and such properties (proceeds of crime) are still in their possession &

-- the property in USA was purchased from out of the mobilization advance, (which was claimed to be received for other purposes) i.e., proceeds of crime.

The attachment order says, "The Section 2(1)(u) of the PMLA defines "proceeds of crime", as any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property. The property valued USD 7,096,755.2 (Rs 42 crore approx.,), listed above, purchased in the name of ZDPL, utilizing the said proceeds of crime, which were obtained by criminal activity related with scheduled offence, are liable to confiscation. Hence, it is proposed to attach the above properties under the provisions of Section 5(1) of PMLA, 2002."

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The ED, Indore ordered a provisional attachment of the properties "for a period of 180 days and further order that same shall not be transferred, disposed, removed, parted with or otherwise dealt with, until or unless specifically permitted to do so by the undersigned."

What was the modus operandi ?

As per the details given in the attachment order, ZDPL was availing credit facilities from various banks under Multiple Banking Arrangement till July, 2003. At the time of formation of consortium in September, 2004, the BG Limit of ZDPL was Rs 40 crores which was extended from time to time and finally it was enhanced upto Rs.333 crores; under overall consortium limit of Rs.2650 crores for the year 2008-09. Meanwhile, a separate sanction of Rs 125 crores was also given by PNB in October/ November, 2006 to ZDPL, under a separate consortium of four banks for the China project under agreement with M/s. JIUDA Holding Pvt., tgd., Singapore.

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By way of resorting to round-tipping/book entries in order to show false increase in the authorized capital/paid-up capital, ZDPL continuously for three years, i.e., 2006-2008 and thereby showing a cosmetic picture of sound financial health of ZDPL before the banks.

Also, by way of maintaining separate sets of balance sheets and submitting before the banks that set of balance sheets which could lead the bank to believe about sound financial health of ZDPL and by submitting another set of balance sheets to income tax department, showing poor financials of the company.

During the course of investigation, summon was issued to Sharad Kabra, under Section 50 of PMLA, 2002 and a statement was recorded from him on 20.05.2015, wherein inter-alia stated that: "Round tripping was done by ZDPL in order to increase the capital of ZDPL as alleged in the charge sheet filed by CBI. This was done to increase the capital to get more advance from the Banks"

Kabra was director in appoximate 30 companies out of which 15-20 were in actual business. He was director in foreign companies, viz., M/s. Zoom Developers Pte Ltd., Singapore, which was formed to do local engineering projects but no business or project could be taken up. He was also director in M/s. Zoom Developers INC USA, which was formed to do local projects but no business was secured.

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Thereafter, Sharad Kabra was arrested on 20.05.2015 for committing the offence of money laundering, as defined under Section 3 of the Act and was produced in the designated PMLA Court, who was given on ED remand for ten days. During the remand period, various evidences collected by this ED during investigation of this case were encountered and a statement under Section 50 of PMLA, 2002 was recorded, wherein he inter-alia stated that;

-- few projects given by the Aggregators remain a paper projects and could not be executed and funds mobilized were used to acquire other assets and to meet the expenses;

-- Aggregators were issuing the work orders to Zoom and once the Work-Orders were received, Zoom approached Banks in India for issuance of Guarantees in favour of Aggregator Banks;

-- once the Guarantee were reached it was processed by the Banks and used as a collateral and amount was disbursed to the aggregators to make the payment of mobilization advance to Zoom

-- all the companies involved in round tripping had accounts in United Bank of India, Mumbai and funds were rotated in one or two days i.e., on 29th or 30th September of every year in 2006, 2007 and 2008.

How the bank money reached USA ?

According to Kabra in his statement, 1280 acres of land was purchased in the name of ZDPL from M/s. Green Square Property Corporation, Philippines for USD 7.00 millions. For this deal no loan was taken for purchase of this property from any bank.

Description of the property as per the registered documents purchased from the US Authorities: "THE SOUTH HALF OF THE NORTHWEST QUARTER AND THE SOUTH HALF OF THE NORTHEAST QUARTER OF SECTION 17, IN TOWNSHIP 17 SOUTH OF MNGE 7 EAST, MOUNT DIABLO MERIDIAN, IN THE COUNTY OF MONTEREY, STATE OF CALIFORNIA."

" Funds were mobilized from PNB and other banks through State Bank of Bikaner and Jaipur (SBBJ); BG No. 1232FLG006106 was issued by PNB on 04.09.06 for execution of Contract No. LTL/ZDPL/20/06/06, dated 20.06.2006 of M/s. Llolindium Trading Ltd.,; an amount of USD 1,120,000 was transferred on 22.05.07 to ZDPL account maintained with SBBJ, Mumbai; from the EEFC account of SBBJ cheques were issued and paid to First American Title Co., USA who was the Escrow Agent for M/s. Green Square Properties & ZDPL and the property was registered around 25.05.07", Kabra stated.

During the course of investigation it was also observed that in order to secure this property from attachment by the government agencies, during the year 2014, this property was transferred to the name of M/s. Novagold International Ltd., a company formed in the British Virgin Island.

Sharad Kabra has admitted in his statement recorded under Section 50 of the Act that he has drafted back-dated contracts between various parties to secure this property which was purchased from out of the 'proceeds of crime'.

As explained by Kabra in this statement, Vijay Choudhary had come out with a proposal to find a company of British Virgin Island and transfer the ownership of USA land and accordingly a company by name M/s. Novagold International Ltd., was short listed.

The proposed agreement/plan was to create a back dated agreement between M/s. Astikor and ZDPL showing that the subject property was purchased by ZDPL on behalf of M/s. Astikor.

Accordingly, during the last week of July, 2014, 1280 acres of land in California was transferred to the name of M/s. Novagold and no money was received in return of the sale by ZDPL or by M/s. Astikor and no work was done by M/s. Novagold on the subject land.

Shockingly, there was no financial involvement in the entire transaction and the property would be transferred without either executing the work or without paying any sale consideration.

"The ultimate idea of the plan was to finally get the 1280 acres of California land to be transferred in the name of either of his daughters Bhavya Choudhary and Divya Choudhary, who stay in USA and UK", Kabra stated to ED.

During the investigation, the ED team also found that transactions over Rs 2,000 Crores were carried out, with so-called Aggregators, on account of fake contracts.

But thats not all. Now, to execute the attachment order, the ED would be issuing a Letter Rogatory to US, very soon. And meanwhile, Vijay Choudhary is also absconding.