McNally Bharat: ED probes 'backdoor return' of old power network via IBC

New Delhi: Enforcement Directorate has traced about ₹105 crore of the ₹155 crore cash infusion made into McNally Bharat Engineering Company Ltd (MBECL) under its insolvency resolution plan to entities linked to the Vishwa Group, people in the know told ET, revealing a trail that forms a key focus of the agency's ongoing FEMA probe.

According to ED sources, the money was not transferred directly to MBECL by the Vishwa Group. Instead, it allegedly moved through a layered network involving Vishwa Group companies, two Kolkata-based NBFCs, Mahabaleshwar Merchants Pvt Ltd and Mandal Vyapaar Pvt Ltd (MVPL), the special purpose vehicle through which MBECL was eventually controlled after the resolution process.

The fund-flow analysis has traced about ₹70 crore to Trolex India Pvt Ltd, a Vishwa Group entity, while another ₹26.5 crore was allegedly routed through Atash Suppliers Pvt Ltd, another Vishwa Group entity, to Cemfil Enterprises Ltd. A further ₹7.3 crore was traced from Vishwa Industrial Co Ltd to Rose Financiers and Commercials Pvt Ltd, sources said. The three legs together account for about ₹104.5 crore.


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Sources added the money was subsequently routed through the intermediary entities to MVPL and then into MBECL as part of the implementation of the resolution plan.

ED is particularly examining the role of Cemfil, an RBI-registered NBFC. Sleuths have come across a business facilitation agreement executed in October 2024 between Trolex India and Cemfil under which funds provided by Trolex were to be held and invested by Cemfil on instructions, with the investments subsequently to be transferred back. The agreement provided for a one-time fee of ₹5 lakh to Cemfil, people quoted above added.

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The federal agency is examining whether such arrangements were used to create layers between the ultimate source of the funds and the entity through which control of MBECL was acquired.

The fund trail assumes significance because BTL EPC Ltd was the successful resolution applicant for MBECL. The resolution plan approved by the National Company Law Tribunal, Kolkata, in December 2023 provided for total consideration of ₹441 crore, including a ₹155 crore cash infusion into MBECL.

Of ₹155 crore, sources said, ₹100.95 crore was infused through MVPL while ₹18.81 crore came through the invocation of a corporate guarantee given by BTL EPC and ₹35.24 crore was generated through MBECL's internal accruals.

MVPL subsequently emerged as the holder of 90% of MBECL's post-resolution equity. Investigators are examining why a relatively small entity with assets of around ₹1.13 crore and revenue of only ₹2.5 lakh in FY24 was used as the principal implementing vehicle for a transaction involving more than ₹100 crore, sources said.

The findings assume significance beyond the McNally Bharat case as they raise questions over the effectiveness of safeguards under the Insolvency and Bankruptcy Code designed to prevent persons connected with a corporate debtor's erstwhile management or control from regaining the asset through indirect structures. ED is examining whether the formal separation between the successful resolution applicant and the source of funds was substantive or merely structural, and whether subsequent changes in the ownership of the special purpose vehicle altered the control architecture after the resolution plan had received NCLT approval.

ED is also examining changes in MVPL's ownership following approval of the resolution plan. BTL EPC initially acquired a 50% stake in MVPL, with its managing director Ravi Todi holding another 1%. However, by September 2024, Narayan Dhelia held 48.99%, Todi 32% and BTL EPC 19%, with the balance held by Mahabaleshwar Merchants.

Sources said the agency is investigating whether these subsequent changes, along with the flow of funds into MVPL, resulted in control of MBECL ultimately being exercised by persons other than the formal resolution applicant.

ED is also examining the role of Sanjay Pasari and entities associated with the Vishwa Group. Pasari had served as MBECL director between 2006 and 2011 while entities linked to the Vishwa Group and the Pasari family collectively held around 19.87% of MBECL before the insolvency process, according to documents being examined by investigators.

The agency is assessing whether these circumstances raise issues under section 29A of the Insolvency and Bankruptcy Code, which places restrictions on persons connected with the management or control of a corporate debtor from submitting resolution plans.

The investigation follows searches by ED's Kolkata zonal office on Tuesday at premises linked to Pasari, Todi, Satnaliwala and the companies involved in the acquisition.