ED attaches 11 properties worth Rs 10.63 crore in J&K Bank PMEGP loan fraud case

The agency says its investigation began from those two sets of FIRs, which concern the Sumbal and Gamud Gadkhud branches of J&K Bank. A survey of the two branches found that 270 PMEGP term loan accounts and 270 PMEGP working capital accounts had turned into non-performing assets, a total of 540 accounts, with the unpaid amount put at Rs 32 crore. The ED has traced proceeds of crime of Rs 11.37 crore, and it says the bulk of that has been siphoned off. It identified 11 assets, held by suppliers-cum-borrowers or brokers and by one bank officer, and attached them provisionally.

Under the money laundering law, a provisional attachment lasts only if it is confirmed by the Adjudicating Authority within 180 days. Until then the owners lose the use of the properties, but the order is not a finding that they are guilty.

The alleged scheme: dummy borrowers and fake invoices

The ED describes a method in which a man named in its statement, along with others, played a major part in getting PMEGP loans fraudulently. According to the agency, the group used the KYC and other documents of borrowers, and fake invoices of firms that did not exist, registered in the names of suppliers-cum-brokers or their family members. Loans were obtained by presenting dummy PMEGP borrowers, and the agency alleges a conspiracy with officials at the two branches. It says the accused cheated the bank, causing it wrongful loss and giving themselves wrongful gain.

The money, the ED alleges, was moved through bank accounts in a series of transactions, and part of it was used to build or renovate assets and for personal enrichment. The agency says this establishes involvement in the diversion, concealment, possession and use of the proceeds. These are the ED's allegations as stated, and no court has made findings on them.

The PMEGP is a credit-linked subsidy scheme for setting up small enterprises, which means a loan is arranged through a bank and a share of the project cost is met by a government subsidy. A fake invoice is useful in such a scheme because the loan is meant to pay a supplier for equipment or materials. If the supplier does not exist, or the goods are never delivered, the money can be sent to someone else, which is what the ED alleges happened here.

What the numbers show and what happens next

The three figures in the case fall in order. The unpaid loans are Rs 32 crore, the proceeds the ED has traced are Rs 11.37 crore, and the properties attached are worth Rs 10.63 crore, so the attachment covers about 93% of the proceeds the agency has traced and a third of the bad loans. The ED does not say whether the remaining proceeds have been found. The law also lets the agency attach property of equivalent value when the proceeds themselves cannot be reached, which is why an attachment can be described by the value of the assets and not by what was taken. A non-performing asset is a loan on which the borrower has stopped paying, and the bank's loss depends on what it recovers from any security, so the Rs 32 crore is not necessarily the amount lost.

The agency's statement does not give the dates of the FIRs, the names of the other accused or of the bank officials, or a response from the accused or the bank. It does not say whether arrests have been made. The next steps are the Adjudicating Authority's review of the attachment, which must happen within 180 days, and any prosecution complaint the ED files in court. Whether the loans can be recovered from the attached properties is a separate question that depends on those proceedings.