New Delhi/Mumbai: The Serious Fraud Investigation Office (SFIO) on Thursday arrested Neeraj Singal, former promoter and managing director of Bhushan Steel Ltd.

Singal has been charged with siphoning off more than 2,000 crore from Bhushan Steel’s bank loans, using 80 different companies. The companies were used for rotating funds through bogus loans and advances, as well as investments, the ministry of corporate affairs said.

Singal was produced before a court and remanded to judicial custody till 14 August.

“This arrest was made as part of the investigation into the affairs of Bhushan Steel Limited and its several group companies by SFIO. The investigation was assigned by the ministry of corporate affairs to SFIO based on complaints received from various sources," the government said, adding that it is SFIO’s first arrest.

Singal has been found guilty of indulging in serious corporate fraud punishable under Section 447 of the Companies Act, 2013, it said.

The erstwhile promoters of Bhushan Steel have been accused of causing wrongful losses to banks. These fraudulent activities led to the company becoming insolvent.

The government said that the erstwhile promoters and directors of Bhushan Steel have not been cooperating during the investigation.

Tata Steel has completed the acquisition of Bhushan Steel under the Insolvency and Bankruptcy Code. Bhushan Steel, which owed about 44,000 crore to creditors, was one of 12 large accounts referred to the National Company Law Tribunal by the Reserve Bank of India.

“Apart from failing to appear before the investigation team, the material facts were also concealed", it added.

Other companies in the list included Essar Steel and Amtek Auto, amongst others.

On 18 May, Tata Steel said in a press statement that it has taken a controlling stake of 72.65% in Bhushan Steel and paid the admitted corporate insolvency costs and employee dues, as required under IBC. Further, settlement of amounts equivalent to 35,200 crore towards financial creditors of Bhushan Steel is being undertaken, and 1,200 crore will be paid to the operational creditors of BSL over a period of 12 months, it said.

The move has been challenged in The National Company Law Appellate Tribunal (NCLAT) Bhushan Steel’s founding Singal family and the firm’s operational creditor Larsen and Toubro Ltd (L&T).

Singal had moved NCLAT questioning Tata Steel’s eligibility to bid for the company under section 29(A) of the Insolvency and Bankruptcy Code (IBC), while L&T had moved the appellate tribunal seeking to be declared a secured creditor so that it gets higher priority in repayment of dues.

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