Manappuram Finance's MD calls ED's decision to freeze assets worth Rs 143 crore as unreasonable

Manappuram Finance Limited's managing director V.P. Nandakumar said that the Enforcement Directorate on Thursday froze his personal assets worth Rs 143 crore, the company announced through an exchange filing.

The Enforcement Directorate (ED) recently conducted searches at six premises in Thrissur, Kerala, belonging to Manappuram Finance and its Managing Director V.P. Nandakumar. The searches were conducted as part of an investigation under the PMLA into the allegations of money laundering from the illegal collection of deposits from the public.

During the course of searches, it was found that the proceeds of crime have been diverted and invested by Nandakumar into immovable properties in his name, and the names of his spouse and children and in the shares of MFL.

"Hence ED has freezed the assets of Nandakumar totalling to Rs 143 Crore. The assets freezed include 8 bank accounts, investment in listed shares and shares of Manappuram Finance Limited. In addition, various incriminating documents evidencing money laundering and property documents of 60 immovable properties were also seized during the course of search for further investigation," an official told IANS.

Nandakumar calls the move unreasonable

In the exchange filing Nandakumar said, "This order is patently high-handed, arbitrary and unreasonable for many reasons. Firstly, the total amount of pending deposits to which the matter pertains is less than Rupees Ten Lakhs which is lying in an escrow Account. Secondly, the shares that have been frozen by the Enforcement Directorate (“ED”) are worth approximately Rupees 2000 Crores, but the value attributed to them is around Rupees 140 crores."

Nandakumar shares facts regarding Agro Farms

He further went on to give facts regarding the case in order to offer assurance to the investors. Nandakumar said that he was the sole proprietor of Manappuram Agro Farms which was engaged in non-financial services business of agriculture in Thrissur until 2015-16. The company, according to him, used to accept deposits from Valapad residents and people in neighbouring areas and offer interest on the deposit. THe company then used the funds raised in the business of agriculture.

Nandakumar said, "Since the principal business of Magro was agriculture, it accepted deposits in the bona fide belief that this was permissible under law. However, based on communications from the RBI in 2012, Magro stopped accepting, renewing and soliciting deposits." He went on to add that post RBI's communication it had stopped taking deposits and had decided to repay the deposits.

Nandakumar in March 2012 raised Rs 159,45,62,582 through sale of shares for repayment of the deposit amount. He said that he repaid Rs 34,56,35,131 by March 16, 2012 and the pending amount was deposited in an escrow account with Punjab National Bank. The repayments were done through this account and according to him the reports were sent to the RBI on a monthly basis.

In September 2022 a pending amount of Rs 9.29 lakh was present in the escrow account.

Nandakumar files petition in Kerala High Court

The MD also said that SEBI, RBI and Registrar of Companies had already conducted their enquiries and there were no adverse findings made by the regulators. He added, "After a lapse of more than 10 years, a certain individual lodged an FIR with the Valapad police station in relation to the aforesaid acceptance of deposits."

According to Nandakumar, the enquiry by ED is due to this FIR and he has filed a petition in the Kerala High Court to quash the FIR. The court in response has passed an interim order and directed that no coercive proceedings should be taken against the accused.

ED finds evidence regarding money laundering and large scale cash transactions

In contrast to the statement by Nandakumar, the ED searches resulted in the detection of evidence regarding money laundering and large scale cash transactions in the form of public deposits, done by Nandakumar through his proprietary firm, Manappuram Agro Farms (MAGRO) without RBI approval.

The deposits were illegally collected by him at various branch offices of MFL which is a Public Listed Company, through some of its employees.

"The outstanding illegally collected deposits which are the Proceeds of the Crime have been detected to be Rs 143 Crore. When RBI detected the same and directed to return the amount to the depositors, the accused responded to RBI that they have returned the money to the depositors but the ED investigation revealed that there is no proof of repayment or no KYC of the depositors," the ED said.

The ED said that Rs 53 Crore of deposits are shown to have been returned in cash, but with no proof of repayment or KYC.

The role of the CFO of Manappuram Finance Limited and other employees, suspected to have assisted in the offence of money laundering, is being investigated.