New Delhi, Jul 23 (PTI) The Enforcement Directorate (ED) has conducted searches at six locations in Hyderabad in connection with a bank-fraud case against the promoters and directors of a company and its associate entities.

The ED initiated its investigation on the basis of an FIR registered by the Anti-Corruption Bureau of the CBI in Hyderabad against SEW LSY Highways Limited and others under various sections of the Indian Penal Code and the Prevention of Corruption Act for allegedly siphoning off and diverting loan funds, cheating and criminal misconduct, resulting in the loss of public money, the agency said in a statement.

The federal agency's Hyderabad zonal office conducted search operations on Tuesday at six locations in Hyderabad under the provisions of the Prevention of Money Laundering Act (PMLA) in connection with a bank-fraud case against SEW Infrastructure Limited (SIL), Prasad and Company (Project Works) Private Limited (PSPWPL), group companies and their promoters and directors, the statement said.

SEW LSY Highways Limited was incorporated as a special purpose vehicle (SPV) for the execution of a concession contract awarded by the Uttar Pradesh State Highway Authority to a consortium of SIL and PSPWPL.

SEW LSY Highways Limited was sanctioned a term loan of Rs 1,700 crore by a consortium of 14 banks led by the Punjab National Bank (PNB). SEW LSY Highways Limited awarded the engineering, procurement and construction contracts to SIL and its group entities, which further sub-contracted the work to other entities.

The ED's investigation has revealed that a part of the project was sub-contracted to group entity SEW Transport Networks Limited (STNL), which in turn further sub-contracted the same at lesser values to other parties, including PSPWPL, which again sub-contracted the same at lesser rates.

As a result of this sub-contracting activity to group entities at lesser rates, SIL and its group entities allegedly diverted and siphoned off the loan funds, the ED has alleged.

Further, according to the terms of the loan, the promoters were required to bring in their own contribution.

However, the investigation has revealed that as part of the loan, funds were diverted to PSPWPL (30 per cent stakeholder in SEW LSY Highways Limited), which in turn infused the loan funds as promoter's contribution. A total amount of Rs 603.68 crore was disbursed to SEW LSY Highways Limited by the banks for the project, the statement said.

"However, the project was not completed and the term loan became non-performing asset, resulting in outstanding amount of Rs 621.78 crore to the banks," the ED said.

The agency said the search operations resulted in a seizure of financial documents evidencing suspected diversion of funds as well as property documents with a current market value of around Rs 120 crore in the names of the promoters and their family members.

A total of 33 bank accounts belonging to SEW Infrastructure Limited, STNL as well as their directors and family members were frozen during the search operations. Further investigation is under progress, the ED said. PTI NES ACB RC

Money laundering investigation prompts PMLA searches, seizures and account freezes in alleged bank fund diversion scheme. Searches under the Prevention of Money Laundering Act followed an FIR alleging that group entities diverted sanctioned loan funds by successive subcontracting at lower values, routed diverted funds into a group company which then infused them as promoters' contribution, and thereby concealed use of bank disbursements. Searches yielded financial and property documents, properties in promoters' and family members' names, and resulted in freezing of multiple bank accounts; further investigation into alleged money laundering and related offences is in progress.