The Enforcement Directorate on Monday stated that it has arrested Sanjay Raghunath Aggarwal in connection with an ongoing investigation under Prevention of Money Laundering Act, in the case of fraudulent GDR (Global Depository Receipt) scheme at M/s Farmax India Ltd (FIL). The case was first registered by the Telangana Police.
Mr. Aggarwal along with the promoters of the GDR issuing company and others curated a scheme of duping Indian investors by fraudulently subscribing to the GDR of Indian companies, from loan obtained from EURAM Bank by pledging the proceeds from the same GDR issue, it said.
FIL with the financial advisory services of Mr. Aggarwal through his entity La Richesse Advisors Pvt. Ltd, had raised US$ 71.91 million (approximately ₹ 318 crore in June-August 2010) in Europe by issuing GDR.
The entire GDR was subscribed by only one entity, Vintage FZE, floated and controlled by Arun Pachariya out of loan funds taken from EURAM Bank by pledging the GDR proceeds of the Indian company, even before the GDRs were subscribed.
The Indian Company in connivance with Mr. Aggarwal and Mr. Pachariya and others fraudulently offered the GDR proceeds as mortgage security to the Bank to arrange loan to Vintage FZE.
But eventually, Vintage FZE did not repay the loan, and the GDR proceeds were adjusted by the Bank against outstanding loan. The GDR proceeds were never repatriated to India. These GDRs were later converted into equity by the FIIs controlled by Mr. Pachariya and sold in Indian Stock market at higher inflated price and caused a loss to Indian investors of around ₹ 54 crore, the ED stated.
Mr. Aggarwal was arrested and produced before the court and has been remanded to 14 days of judicial custody.
