ED attaches ₹18.33 crore properties in Kallam Modern Rice Mills bank fraud and money laundering case
The Enforcement Directorate’s Visakhapatnam Sub-Zonal Office has provisionally attached 55 immovable properties valued at ₹18.33 crore belonging to Kallam Peri Reddy, his family members and associates. The action relates to an alleged bank fraud and money laundering case involving Kallam Modern Rice Mills Pvt. Ltd. and other entities.
The properties are located in Andhra Pradesh and Telangana. Of the 55 properties, 50 are classified as other immovable properties valued at ₹16.88 crore and five are flats valued at ₹1.45 crore. The Enforcement Directorate has identified these assets as proceeds of crime under the Prevention of Money Laundering Act, 2002, or as properties representing equivalent value.
A provisional attachment is a temporary measure under the PMLA to prevent the transfer, disposal or dealing of properties suspected to be connected with money laundering while proceedings continue. The attachment is subject to adjudication by the Adjudicating Authority under the Act. Affected parties have the opportunity to contest the attachment. The Enforcement Directorate has stated that further investigation is continuing.
Kallam Peri Reddy Rice Mill Case: The Origin
The Enforcement Directorate’s investigation originated from a First Information Report registered by the Central Bureau of Investigation’s Economic Offences Wing, Chennai. The FIR followed a complaint by the State Bank of India, successor to the erstwhile State Bank of Hyderabad, Guntur.
The complaint concerned credit facilities of ₹24.57 crore obtained between 2010 and 2013 from the State Bank of Hyderabad’s Arundelpet Branch in Guntur. The named borrower concerns are Kallam Modern Rice Mills Pvt. Ltd., Sri Ramabrahma Modern Rice Mills Pvt. Ltd. and Sri Vinayaka Traders, along with other associated persons and entities.
According to the Enforcement Directorate, the borrowers submitted forged property title deeds relating to collateral properties to obtain the credit facilities. The agency states that the borrowed funds were diverted, resulting in a loss of ₹18.33 crore to the bank.
Network of entities
The Enforcement Directorate has stated that Kallam Peri Reddy operated and managed approximately 26 entities registered in the names of his relatives, employees and associates. The three borrower concerns named above form part of this group. The remaining entities have not been individually identified in the press release.
The agency’s findings indicate that these entities were registered in the names of different individuals but were operated and managed by Kallam Peri Reddy.
Cash withdrawals
The Enforcement Directorate has disclosed that approximately ₹23.81 crore was withdrawn in cash from the cash-credit accounts of the three borrower concerns. These withdrawals were made in the names of workers, accountants and Kallam Peri Reddy himself.
The ₹23.81 crore cash withdrawal figure is close to the total credit facilities of ₹24.57 crore obtained by the group.
Acquisition of properties and subsequent transfers
According to the Enforcement Directorate, several properties were purchased using the loan proceeds, partly through cash withdrawn from bank accounts controlled by Kallam Peri Reddy. The agency states that some of these properties were later transferred to relatives and associates without any sale consideration. The Enforcement Directorate describes the relatives and associates as namesake owners and states that Kallam Peri Reddy continued to be the actual beneficial owner of the properties.
The provisional attachment of properties valued at ₹18.33 crore covers assets identified in connection with these findings. The attached properties are located in Andhra Pradesh and Telangana and comprise the 50 other immovable properties and five flats detailed above.
Borrower concerns
Kallam Modern Rice Mills Pvt. Ltd. is the principal company named in connection with the case. The Enforcement Directorate identifies it as one of the borrowers that obtained credit facilities using forged collateral title deeds and as one of the three concerns whose cash-credit accounts were examined for the cash withdrawals.
Sri Ramabrahma Modern Rice Mills Pvt. Ltd. is identified as the second borrower concern that obtained credit facilities from the erstwhile State Bank of Hyderabad. Its cash-credit account formed part of the analysis that identified the aggregate cash withdrawals of approximately ₹23.81 crore across the three borrower concerns.
Sri Vinayaka Traders is the third named borrower concern. Unlike the first two, which are private limited companies, it is described as a trading entity. Its cash-credit account was also included in the overall cash withdrawal analysis.
The credit facilities of ₹24.57 crore and the cash withdrawals of approximately ₹23.81 crore are reported as group-level figures relating to the three borrower concerns.
Financial figures reported by the Enforcement Directorate
The Enforcement Directorate has reported the following principal figures:
- Credit facilities obtained between 2010 and 2013: ₹24.57 crore
- Cash withdrawn from the cash-credit accounts of the three borrower concerns: approximately ₹23.81 crore
- Loss to the bank: ₹18.33 crore
- Value of properties provisionally attached: ₹18.33 crore
The attached properties consist of 50 other immovable properties valued at ₹16.88 crore and five flats valued at ₹1.45 crore.
Legal basis of the action
The Enforcement Directorate has invoked the Prevention of Money Laundering Act, 2002. The provisional attachment has been ordered under the provisions of the Act relating to proceeds of crime and the powers of authorised officers to attach properties where the statutory conditions are met.
The properties have been attached either as proceeds of crime or as properties of equivalent value. The attachment is subject to the adjudication process under the Act, during which the affected parties may present their case. Final confiscation, if any, is a subsequent stage governed by the statute.
The Enforcement Directorate has stated that further investigation in the matter is continuing.
