Famous Money Laundering Cases in India

Law
17-May-2024
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Some people in India only use lawful means to obtain money, while others choose dishonest and illegal means. One such illicit method is money laundering, which legitimizes illegal financing.  In this article, we will discuss some of the most famous money laundering cases and the statistics of such cases which occurred in recent times.

Stats on Money Laundering Cases

According to PTI official statistics, the Enforcement Directorate has brought up to 5,422 cases under the Prevention of Money Laundering Act's criminal provisions.

The federal agency filed prosecution complaints totaling 1992 before the courts. Over the 17 years since the PMLA came into effect, the agency has conducted 400 arrests and found 25 guilty of the crime of money laundering.

The Adjudicating Authority of the PMLA has validated 1,369 of the 1,739 provisional attachment of asset orders issued. It has also verified the attachment of properties valued at Rs 58,591 crore out of 1,04,702 crore.

Top Controversial Cases of Money Laundering In India

Let’s take a look at some well-known Indian scams, including allegations, legal proceedings, court judgments, and punishment in this section:

The Kingfisher Airlines case

One of the most familiar cases in Indian history is the Kingfisher Airlines affair. Vijay Mallya created this airline in 2005. The start of this fraud happened in 2007 when Air Deccan, a low-cost airline, had been having financial issues. Regretfully, the escalating expense of oil caused Air Deccan to incur substantial losses.

Vijay Mallya then obtained substantial bank loans to preserve his company's standing in the industry. Unfortunately, the company's debt reached nearly half its market worth in just two years.

As its financial issues grew worse, Kingfisher Airlines closed its doors in 2012, leaving a trail of unpaid invoices and dissatisfied investors in its tracks. Around 2013, Mallya defaulted on bank debts of 9000 crores, and Kingfisher Airlines suffered several losses.

Furthermore, the company broke major business ethics during Kingfisher Airlines' merger with Air Deccan, according to the Serious Fraud Investigation Office.

Further investigation revealed that Vijay Mallya's debts were repaid through foreign exchange to several "tax havens." He would designate dummy directors and transfer the loan amount to dormant businesses.

Allegations and Accusations: Vijay Mallya and other key executives were accused of debt defaults. He was also charged with spending loan money to fund his Force India Formula One Racing team and Royal Challengers Bangalore (RCB) IPL cricket team.
Legal Proceedings and Court Decisions: The ED and the CBI started to investigate alleged financial offenses. Mallya departed India for the United Kingdom in March 2016. An extradition request to India was made in February 2017.
Court judgments and punishment: The Supreme Court sentenced Vijay Mallya to 4 months in prison in 2022 and an additional $40 million fine.

Punjab National Bank fraud case

Throughout India's history, this money laundering issue has attracted significant attention and controversy, altering the whole political landscape. The masterminds behind this massive scam were diamantaires Mehul Choksi and his nephew Nirav Modi, who enlisted the help of more than fifty workers from the Punjab National Bank's Brady House branch in Fort, Mumbai.

Here, bankers created fake Letters of Undertaking (LoUs) for over 10,000 crores in Indian bank branches to import pearls for a year. To obtain overseas loans worth billions, the staff members falsified bank guarantees. In 2011, Nirav Modi and Mehul Choksi obtained their first false guarantee.

Over the next 74 months, they obtained almost 1200 more fictitious guarantees without anyone noticing anything fishy.

Allegations and Accusations: Banks were to be held accountable in cases of default under these LoUs. PNB filed a lawsuit against the CBI in 2018 claiming that Nirav Modi received these letters of intent from PNB without repaying the margin amount owed on the loans. Along with several senior PNB executives, Modi and Choksi were accused of masterminding the plot to obtain money for their personal and commercial ventures.
Legal Proceedings and Court Decisions: Investigative authorities started thorough investigations into the incident when the scam was made public. Many people were taken into custody, including executives from Nirav Modi and Choksi's firms as well as PNB officials. Widespread indignation at the case gave rise to demands for tighter regulatory control of the banking industry.
Court judgments and punishment: After that, Nirav Modi and Mehul Choksi left the nation to avoid being detained and extradited. But attempts to prosecute them went on, with demands for extradition made by Indian authorities in the nations where they had sought safety. Many people connected to the scam were found guilty and given jail sentences.

Satyam scam

The Satyam fraud is sometimes referred to as "India's Enron Scandal". The subject of this lawsuit is B. Ramalinga Raju and his business, "Satyam Computer Ltd." The company's promoters altered several numbers about cash balances, interest liabilities, operating profitability, and sales to draw in more investors.

The creator, Mr Raju, also fabricates multiple bank statements to inflate the balance sheet with imaginary funds.

In 2009, India was already experiencing a recession, at the time this case or fraud was made public. Admittedly, the firm and its founder lied to its board, stock exchanges, investors, and other stakeholders about the manipulation and falsification of records valued at 7,000 crores.

Allegations and Accusations: To deceive investors and shareholders, Raju and other well-known executives were prosecuted for fabricating board decisions, inflating revenues, and altering bank records. The allegations cast doubt on India's corporate governance and brought up important issues with regulatory supervision.
Legal Proceedings and Court Decisions: Raju's confession prompted the Indian authorities to step in quickly and begin looking into the scam. Through investigations, the Securities and Exchange Board of India and the Serious Fraud Investigation Office determined the full scope of the financial manipulation.
Court judgments and punishment: Raju was charged with the following offenses and sent to jail after he admitted to the scam:
1) Forgery 
2) Criminal conspiracy and 
3) Breach of trust
Furthermore, PwC's auditor was found guilty of this conspiracy and had his license revoked for two years.

Saradha Group Financial Scandal

It is one of the most famous fraud incidents in India. Under Sudipta Sen's leadership, the Saradha Group began as an association of more than 200 private companies. But the group turned its activities into a Ponzi scam, mostly aimed at the lower-class and rural populations, offering large returns on investments in fictitious businesses. In a few years, it raised almost 2500 crores and attracted up to 1.7 million investors.

Allegations and Accusations: The CEO and creator of this plan, Sudipto Sen, revealed the participation of TMC politicians, including Mamata Banerjee, in an 18-page confession he wrote in 2013.
Legal Proceedings and Court Decisions: The police filed multiple First Information Reports (FIRs) against the Saradha group. The Supreme Court of India moved all inquiries related to the case and other Ponzi schemes to the Central Bureau of Investigation in 2014.
Court judgments and punishment: In 2016, Sudipta Sen and several other offenders received prison sentences and harsh punishments. To further recompense the investors who had been duped, properties and other assets associated with the Saradha Group were seized and put up for sale.

2G Spectrum Scam

The Times Magazine has confirmed that the 2G scandal is the second most significant instance of the misuse of the executive's power. The issue concerns the 2008 distribution of telecom licenses and spectrum at discounted rates under the previous Telecom Minister A. Raja's administration.

The government allegedly lost 176,000 crores, according to CAG. In addition, the licenses were given to ineligible applicants who had used dishonest techniques to obtain licenses and access the spectrum, including repressing facts, disclosing inaccurate information, and submitting counterfeit papers.

Allegations and Accusations: The primary accused included A. Raja, fourteen other people, and three businesses: Swan Telecom, Reliance Telecommunications, and Uninor. The primary offender was accused of offering mobile phone network licenses and airwaves in exchange for money.
Legal Proceedings and Court Decisions: The Supreme Court's 2012 decision declared that the 122 licenses awarded in 2008 were void. It said licenses may only be awarded through fair tender procedures and auctions.  According to the Court, this allocation procedure was “unlawful and unfair.”
Court judgments and punishment: In 2017, even A. Raja, the primary culprit, was declared innocent by a special CBI court. It's also essential to keep in mind that the CBI has appealed this decision to the Delhi High Court.

ABG Shipyard case

This is the most popular instance of suspected unlawful financing. In 1985, ABG Shipyard was founded. It specializes in producing a large variety of boats. Regretfully, by 2017, the company was heavily indebted and accused of financial mismanagement, which raised concerns about its operations.

It was claimed to have cheated a bank out of almost 22,842 crores. This firm duped over 28 organizations, including ICICI Bank and the State Bank of India (SBI).

Allegations and Accusations: The CBI's inquiry revealed that ABG Shipyards mainly obtained loans from many banks and was able to misappropriate money for various uses.
Legal Proceedings and Court Decisions: Although the Fraud Identification Committee of the SBI began an inquiry that led to the fraud's discovery in June 2019, the first complaint to the CBI was not received until November 2019. A charge sheet was filed in 2022 against 19 entities, 3 located in Singapore, Rishi Agarwal, and five other accused parties.
Court judgments and punishment: The CBI arrested Rishi Agarwal, the earlier founder of ABG Shipyard Ltd. However, as the charge sheet was lacking some details, he was released shortly on bail.

ICICI Bank- Videocon case

This case is a clear reminder of the complex connection between corporate entities and financial institutions. Deepak Kochhar, administrator of Videocon Group and NuPower Renewables Pvt. Ltd., and Chanda Kochhar, former MD and CEO of ICICI Bank, are parties to this lawsuit.

ICICI Bank and Videocon Group investor Arvind Gupta discovered this fraudulent activity.

Allegations and Accusations: The investigation team discovered that Chanda Kochhar had approved 1,875 crores loans to Videocon Group from ICICI. Her husband's business organizations paid her this bribe in some way for this.
Legal Proceedings and Court Decisions: In September 2020 Chanda and Deepak Kochhar under the PMLA Act. Furthermore, the ED had attached moveable and immovable assets worth Rs 78 crore as a part of the recovery process.
Court judgments and punishment: A special Mumbai court and the Bombay High Court granted bail to them in 2021. The Kochhars were also detained and questioned for bribing in this scam. Right now, the CBI is in charge of them.

Indian Coal Allocation Scam

This fraud was called the "Coalgate scam." It included the illegal distribution of the country's coal by then-prime minister Manmohan Singh to private sector firms and public sector organizations (PSEs) that were not a part of the production plans of Coal India Ltd. and Singareni Collieries Company Limited (SCCL).

Allegations and Accusations: The CAG claims that between 2004 and 2009, the Indian government gave 194 coal blocks to different companies unlawfully. This resulted in a loss of 185,591 crores.
Legal Proceedings and Court Decisions: The Supreme Court of India has decided that since their distribution was unlawful, all 214 coal blocks generated since 1993 need to be reallocated.
Court judgments and punishment: The special CBI judge recognized the offense under several IPC sections. After serving summonses to each other in this case, the two accused parties went before the Supreme Court, which granted temporary bail to avoid additional procedures.

Yes Bank – DHFL money laundering

It is one of the high-profile cases in India. Rana Kapoor, the former CEO and founder of Yes Bank, is accused of giving DHFL Bank many loan facilities while employed there for personal financial benefit.

Allegations and Accusations: According to the ED, Yes Bank purchased debentures from DHFL Bank for 3,700 crores between April and June 2018, and DHFL received the money. Moreover, DOIT Urban Ventures Pvt. Ltd. (DUVPL), controlled by Rana Kapoor and his family, received a 600 crore loan from DHFL. This was carried out without sufficient security.
Court judgments and punishment: The PMLA Act's numerous clauses served to charge each of the scammers. In 2022, Gautam Thapar, the Avantha Group promoter, and Rana Kapoor and his spouse were given bail. Avinash Bhosale and Sanjay Chhabria, two builders connected to this crime, were also placed under police custody and had their assets, valued at 415 crores, attached in the bank loan fraud case. They are now in court detention.

Conclusion

Corruption and greed are the two main drivers of financial fraud and instances of money laundering. In addition to hurting economies by creating an unequal demand for money, it affects the private sector by encouraging fierce rivalry that serves as a front for money laundering.

Frequently Asked Questions

Q: Who are the biggest money launderers in India?

Some of the money launderers in our country are Vijay Mallya, Nirav Modi, Mehul Choksi, and Chanda Kochar.

Q: What role does the SEBI play in preventing cases of money laundering?

SEBI issues guidelines on AML, which are methods formed under the Prevention of Money Laundering Act.

Q: What role does the Enforcement Directorate play in cases of money laundering?

The ED may demand that an accused pay a sum equal to the range of assets that may result from the crime. They also focus on guidelines or rules mentioned previously concerning the Prevention of Money Laundering Act.

Q: Who controls money laundering cases in India?

The FIU-IND is an organization under the Ministry of Finance in India responsible for combating financial crime.