A day before the National Company Law Appellate Tribunal (NCLAT) pronounces its judgment on the petition of Neeraj Singal, the erstwhile promoter and managing director of Bhushan Steel, challenging the eligibility of Tata Steel to bid for his bankrupt company, the Serious Fraud Investigation Office (SFIO) arrested him for allegedly siphoning off funds worth over Rs 2,000 crore. This is the first time that the SFIO has arrested a person for fraudulent activities.
The investigation body under the ministry of corporate affairs (MCA) got powers to arrest people for violations of companies law last year. Singal was arrested in the national capital and has been sent to judicial custody till August 14, an MCA state-ment said. This is not Singal’s first brush with the law. In 2014 he was arrested by the Central Bureau of Investigation in connection with a Rs 50-lakh bribery case involving the then chairman and managing director of Syndicate Bank, SK Jain.
In May, Bhushan Steel was taken over by Tata Steel following the corporate insolvency resolution process. According to a finance ministry tweet, Singal is “accused to be guilty of siphoning off funds of over Rs 2,000 crore from the loans availed by Bhushan Steel using more than 80 companies”. The companies were used for fraudulent activities of rotation of funds through bogus loans and advances, and investments, among others, said the tweet. In another tweet, the ministry said fraudulent activities contributed to the company becoming insolvent.
The MCA in a statement said that Singal’s arrest has been made in exercise of the powers under Section 212(8) of the Companies Act, 2013, based on the material in its possession which has revealed that he is guilty of indulging in serious corporate fraud punishable under Section 447 of the Companies Act, 2013. It said that Singal has not been cooperating during the investigation till now. “Apart from failing to appear before the investigation team, material facts were also concealed,” the statement added.