RKM Powergen Loan Fraud: ED Seizes Assets Worth Rs1,000 Crore, Freezes FDs, MFs of Rs912 Crore

Moneylife Digital Team 04 February 2025

Economy & Nation

The directorate of enforcement (ED) has conducted search operations at three locations in Chennai as part of its ongoing investigation into RKM Powergen Pvt Ltd (RKMPPL) under the Prevention of Money Laundering Act (PMLA), 2002. The searches targeted premises linked to Andal Arumugam, S Arumugam and others.

"During the search operations, ED officials seized multiple mobile phones and electronic devices containing substantial incriminating evidence. Additionally, under Section 17(1)(A) of PMLA, freezing orders were issued for fixed deposit receipts (FDRs) and mutual funds amounting to Rs912 crore. Furthermore, key documents related to immovable properties, collectively valued at about Rs1,000 crore, were confiscated," the agency says.

The investigation was initiated following a first information report (FIR) registered by the economic offences wing (EOW) of the central bureau of investigation (CBI). The case revolves around the alleged fraudulent acquisition of the Fatehpur east coal block in Chhattisgarh, allocated by the Union ministry of coal for power sector development.

ED's investigation has uncovered that RKMPPL secured a loan from the Power Finance Corporation (PFC) based on the coal block allocation. A significant portion of these funds, Rs3,800 crore, was transferred to a foreign entity, MIPP, controlled by RKMPPL, ostensibly for the purchase of overvalued plant and machinery.

Further scrutiny revealed that after acquiring the coal block, RKMPPL issued 26% of its shares to Malaysia-based Mudajaya Corporation Bhd and 10.95% to Enerk International Holdings Ltd at a premium of Rs240 per share. In contrast, 63.05% of shares were allocated to RK Powergen at face value. The valuation methodology was found to be inconsistent, and chartered accountants' fair valuation assessments were not uniformly applied, ED says.

Subsequent investigations indicate that Mudajaya Corporation financed its Rs240 per share premium by diverting PFC-sanctioned funds originally allocated for equipment procurement from MIIP International, a subsidiary of Mudajaya Corporation, the agency says adding, "This process effectively led to the round-tripping of project funds, with an estimated Rs1,800 crore being routed back to RKMPPL through foreign entities under the pretext of equity participation."

ED says it continues to examine further links in the case and additional legal action is expected based on ongoing findings.

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