In a major victory for public sector banks, the Enforcement Directorate (ED) in Hyderabad has successfully returned attached properties worth nearly Rs 63 crore to two lenders. This restitution marks a critical step in recovering funds lost in a significant loan fraud case involving GS Oils Limited.
Details of the Restitution and the Fraud
The recovered assets, with a value of approximately Rs 63 crore at the time of their attachment, have been handed back to the State Bank of India (SBI) and UCO Bank. SBI received properties valued at around Rs 62 crore, while UCO Bank got assets worth Rs 75 lakh. The action was taken under the legal framework of the Prevention of Money Laundering Act (PMLA).
The case originated from complaints filed by the banks themselves. SBI alleged a wrongful loss of Rs 274 crore, and UCO Bank reported a loss of Rs 32 crore, after loans given to GS Oils Limited turned into non-performing assets (NPAs). Based on these complaints, the Central Bureau of Investigation (CBI) registered FIRs, prompting the ED to launch a money laundering probe in 2016.
How the Loan Fraud Was Executed
The ED's investigation uncovered a complex web of financial deception. The agency found that GS Oils had taken multiple credit facilities from both banks. Instead of using the funds legitimately, the accused engaged in fraudulent activities.
Loan funds were round-tripped and parked in various associate companies. The money was either withdrawn in cash or used to purchase land in the names of these entities. Shockingly, these newly acquired properties were then mortgaged again to secure additional loans from the banks, compounding the fraud.
A key method of diversion involved the fraudulent issuance of Letters of Credit (LCs) to related shell companies. These LCs were issued for bogus supplies of materials. They were later devolved, and the funds were illegally routed back to the promoters of GS Oils, causing massive losses to the public sector banks.
Legal Process and Asset Recovery
To facilitate the recovery, the ED encouraged SBI and UCO Bank to file formal restitution applications under Section 8(8) of the PMLA before the special PMLA court in Nampally, Hyderabad. The ED conveyed its official concurrence for returning the attached immovable properties to the banks, who were the victims of the crime.
The special court allowed these petitions through orders passed in March and on December 17. This legal clearance paved the way for the restoration of the attached assets. The returned properties include agricultural and industrial lands located in Adilabad, Asifabad, and Mancherial districts of Telangana, as well as in Wani, Maharashtra.
Significance of the Recovery
This restitution exercise is highly significant. It underscores the ED's focused efforts to ensure that proceeds of crime are returned to their rightful claimants. For public sector banks burdened with bad loans, such recoveries provide partial but crucial relief.
The action sends a strong message that agencies are working to trace and recover public funds lost to sophisticated financial frauds. It highlights the importance of the PMLA's provisions in not just attaching assets but also in restoring them to victims, thereby upholding the principle of restorative justice in financial crimes.
