Delhi: Shell companies racket busted

The Enforcement Directorate (ED) today produced Surendra Kumar Jain and Virendra Jain, before the Special Court after arresting them on March 20, for offences of money laundering using shell companies.

The Special Prevention of Money Laundering Act (PMLA) Court has granted their custody to the ED for 10 days.

The Serious Fraud Investigating Office (SFIO) had earlier filed criminal complaint in the Tis Hazari Courts, Delhi, against Jain Brothers and others.

A case under Prevention of Money Laundering Act, 2002 (PMLA) was also registered by the Enforcement Directorate.

During the investigation under PMLA, it was revealed that Jagat Project Ltd converted its unaccounted money to the tune of Rs. 64.70 crore into apparently legitimate transactions by way of share subscription through various companies.

Out of this amount, Rs. 62.20 crore of unaccounted money was laundered through 26 shell companies controlled by Jain Brothers.

In lieu of the above accommodation entry of Rs. 62.20 crore, Jain Brothers received a consideration of Rs. 1,11,96,000.

Surendra Kumar Jain and Shri Virendra Jain in their various statements have revealed the modus operandi involved in the money laundering of Jagat Projects Ltd.

The ED has already provisionally attached a hotel property to the extent of Rs. 64.70 crore, invested though money laundering, which is being managed by Radisson Blu at Plot No. 4, Sector-13, Dwarka, New Delhi.

The modus operandi of Jain Brothers was to launder the unaccounted money through the process of placement of funds, layering of transactions and the final integration of laundering money into the banking channel camouflaged as legitimate share premium transactions.

Funds were brought in by the mediators on behalf of the beneficiaries through the mediators.

Jain Brothers were providing accommodation entries by accepting funds from their beneficiaries through mediators and converting the same into share premium transactions in the beneficiary company.

In this process Jain Brothers earned money as a certain percentage of the unaccounted money converted into share premium.

Further, during investigation in the matter of NKS Holdings Pvt. Ltd. and other companies, controlled by Surendra Kumar Jain and Virendra Jain, it was revealed that during the short period of three months between the opening and closing of the accounts of these companies, there was credit and debit summations to the tune of Rs. 8000 crore.

This was achieved by way of circular flow of funds through rotational transactions in the accounts of NKS and other companies, which continued till the summations of debit and credit entries reached the total figure of around Rs. 1000 crore or more in each of the bank accounts of these companies so as to fictitiously size up its balance sheets.

It was an attempt to merge these companies sized up balance sheets with the listed NBFCs so as to give accommodation entries to prospective beneficiaries on future dates.