Bhushan Steel's former promoter Neeraj Singal has been arrested for allegedly siphoning off funds worth over Rs 2,000 crore, according to officials of the Serious Fraud Investigation Office or SFIO. This is the first time that the SFIO has arrested a person for fraud, a senior official said.
Mr Singal was arrested in the national capital and has been sent to judicial custody till August 14, another official said.
Financial Services Secretary Rajiv Kumar said it was paying time for those who have indulged in fraud and diversion of loans.
"Another blow to Crony capitalism. No mercy for siphoning off Public money. Arrest of ex promoter of Bhushan SL -zero tolerance of Govt. to fraudsters & economic offenders #CleanBanking, ?? ???? ?? ????. #NPA Recoveries and action to continue. @PMOIndia @FinMinIndia @PIB_India," Mr Kumar tweeted.
The probe agency, which comes under the Corporate Affairs Ministry, got powers to arrest people for violations of companies law last year.
In a release, the ministry said the arrest was made as part of the investigation into the affairs of Bhushan Steel Ltd (BSL) and its several group companies.
"During the course of investigation, the team has found that the erstwhile promoters of BSL have used multitude of complex, fraudulent maneuvers to divert/ siphon-off funds amounting to thousands of crores raised by the then management of BSL from public sector banks using its several associate companies," the release said.
Such activities led to wrongful losses to the banks and other investors in these companies, it added.
According to the ministry, the erstwhile promoters and directors of BSL have not been cooperating during the investigation till now. Apart from failing to appear before the investigation team, the material facts were also concealed, it added.
Following insolvency resolution process, BSL's ownership has been transferred to the Tata Group.
In a series of tweets, the Finance Ministry said Mr Singal is "accused to be guilty of siphoning off funds of over Rs 2,000 crore from the loans availed by BSL using more than 80 companies".
The companies were used for fraudulent activities of rotation of funds through bogus loans and advances, and investments, among others, it said in a tweet.
In another tweet, the ministry said fraudulent activities contributed to the company becoming insolvent.
"Bhushan Steel Limited is one of the 12 big cases that had been referred for insolvency resolution by banks. Tata Group has taken-over management of the company from the Singals. SFIO investigation is on-going," it said.
Rajiv Kumar also said the government is committed to bring all who have defrauded public money to book but promote honest and clean business.