ED arrests ex-Andaman MP, 2 others in co-op bank 'fraud' case

The Enforcement Directorate (ED) on Wednesday arrested former MP from Andaman and Nicobar Islands and Congress leader Kuldeep Rai Sharma along with two others in a money laundering case linked to an alleged Rs 500-crore cooperative bank fraud.

These are the first arrests made by the federal probe agency under the anti-money laundering law in the Union Territory.

Sharma, 58, is a former chairman of the Andaman Nicobar State Cooperative Bank (ANSCB). The two others arrested are K Murugan, the MD of the bank, and K Kalaivanan, the bank's loan officer, the ED said.

A special Prevention of Money Laundering Act (PMLA) court in Kolkata has sent Sharma and Kalaivanan to eight days in ED custody, it said.

Murugan was not produced before the court as he was admitted to a hospital, officials said.

The case pertains to an over Rs 500 crore worth "fraud" allegedly committed by the officials of the cooperative bank, including Sharma, and others, who were responsible for sanctioning loans, according to the agency.

"These persons, in connivance with their accomplices, floated several shell companies and sanctioned large loans to them as well as to their regular entities in flagrant violation of the rules and laid down procedures of the bank with the sole intent of not repaying the funds, thereby causing losses to the bank and generating corresponding gains for themselves," the ED claimed.

The money laundering case stems from an FIR of the Crime and Economic Offences Cell of the Andaman & Nicobar Police.

The ED said its probe indicates that loans were sanctioned through more than 100 accounts in the names of various firms and shell companies in "complete disregard" of the laid-down procedures and guidelines of the bank, and the amount involved in the fraud exceeds Rs 500 crore.

"Evidence collected so far also indicates that a loan amount of Rs 230 crore was fraudulently taken exclusively for the benefit of Sharma and his associates, including the Managing Director (Murugan) and Loan Officer (Kalaivanan)," it said.

The agency alleged Murugan and Kalaivanan "fraudulently" availed loans from the bank in the names of companies incorporated in the names of their relatives. They helped their associates to obtain multiple loans for a 5 per cent commission on the instructions of Sharma. The commission amount was taken either in the form of "cash" or through associates by using the accounts of shell companies, it claimed.

The ED had conducted searches in July-August — the first raids by it in a money laundering case in the Andamans.

Sharma was arrested by the Andaman Police in July. Seven others were also arrested including Murugan and Kalaivanan.