ED Files Money Laundering Prosecution Against Bharat Papers Ltd in ₹200-Crore Bank Fraud Case

India's financial crime watchdog has filed money laundering charges against a paper manufacturing company and five of its directors in connection with an alleged ₹200-crore bank fraud that involved the systematic siphoning of loan funds through a network of shell entities and bogus companies. The case, which highlights systemic vulnerabilities in India's banking sector, centers on allegations that funds meant for legitimate business operations were diverted through sophisticated financial engineering between 2008 and 2013.

Background and Context

The Directorate of Enforcement (ED) initiated its investigation following a First Information Report (FIR) registered by the Central Bureau of Investigation's Anti-Corruption Branch in Jammu. The original case focused on irregularities in loans sanctioned to Bharat Papers Limited by a consortium of banks led by the State Bank of India. According to investigators, the loans were granted for specific business purposes but were allegedly diverted for personal gain, causing substantial losses to public sector banks.

The ED's investigation, conducted under the Prevention of Money Laundering Act (PMLA), 2002, revealed a complex scheme designed to obscure the trail of funds through multiple layers of transactions. The prosecution complaint was filed before the Special Court (PMLA) in Jammu on January 30, 2026.

Key Figures and Entities

The ED named five individuals in its prosecution complaint: Anil Kumar, Parveen Kumar, Baljinder Kumar, Rajinder Kumar, and Anil Kashyap. These directors and associates of Bharat Papers Limited allegedly orchestrated the fraudulent scheme. During the investigation, Anil Kumar was arrested under PMLA provisions, highlighting the seriousness of the allegations.

The investigation uncovered a network of entities allegedly used to launder the proceeds of crime. These included M/s DEE ESS Engineers, M/s Triveni Engineers, M/s Arrow Scafftech Pvt Ltd, M/s R S Industries, M/s Arrow Enterprises, M/s Suka Mouldings Pvt Ltd, M/s Kahion Auto Industries, and M/s Regent Fabrications. Many of these entities showed little or no genuine business activity, serving primarily as conduits for diverting funds.

Particularly sophisticated was the use of M/s Indo Global Tecno Trade Limited, described by investigators as a non-functional company. Funds were routed through this entity and subsequently channeled back to Bharat Papers Limited as share capital and investments, creating the appearance of legitimate transactions while obscuring the audit trail.

Legal and Financial Mechanisms

The alleged fraud employed multiple money laundering techniques. Investigators found that loan funds were diverted through bogus entities, substantial cash withdrawals, and unauthorized bank accounts opened outside the consortium banking arrangement. Large-scale cash withdrawals from loan, current, and cash credit accounts helped obscure the money trail.

Physical assets were also misappropriated. According to ED findings, machinery parts were stealthily removed from factory premises and sold, with transactions camouflaged through bogus invoices to appear legitimate. The company's books of accounts were allegedly manipulated, including abnormal stock write-offs in financial years 2010-11 to 2012-13, further masking the diversion of funds.

The ED conducted searches across Jammu and Kashmir, Punjab, and Uttar Pradesh, seizing incriminating documents and digital evidence. These operations led to the recovery of over ₹30 lakh in cash and approximately 600 grams of gold, which the agency linked to proceeds of crime. Under PMLA provisions, the agency provisionally attached immovable properties valued at ₹66.77 crore, including industrial land in Kathua district and residential properties in Ludhiana.

Systemic Implications and Regulatory Response

The case underscores significant challenges in India's banking oversight and corporate governance frameworks. The alleged ability of a single company to divert ₹200 crore in bank loans through a network of shell entities raises questions about the effectiveness of due diligence procedures and monitoring mechanisms in the banking sector.

Complicating matters, Bharat Papers Limited is currently undergoing insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) before the National Company Law Tribunal (NCLT) in Chandigarh. The ED alleges that the company and its directors failed to cooperate with the Corporate Insolvency Resolution Process (CIRP), including not handing over records, potentially undermining efforts to maximize creditor recovery.

The case highlights the intersection of banking fraud, money laundering, and corporate insolvency – three areas where India's regulatory framework continues to evolve. It demonstrates how sophisticated fraud schemes can exploit gaps between different regulatory regimes, necessitating greater coordination between agencies like the ED, CBI, and the Insolvency and Bankruptcy Board of India.

Sources

This report draws on the prosecution complaint filed by the Directorate of Enforcement, Jammu Sub-Zonal Office, and the agency's public statements regarding the investigation. Additional context comes from the Prevention of Money Laundering Act, 2002, and proceedings before the National Company Law Tribunal as referenced in the ED's findings.