The Enforcement Directorate (ED) has initiated a money laundering investigation against Essel Group chairman and Zee founder Subhash Chandra over alleged financial irregularities involving ₹980 crore in loans extended by LIC Housing Finance Limited (LICHFL) to two companies linked to the group. The alleged defaults have resulted in a wrongful loss of ₹1,322 crore to the public sector lender, according to people familiar with the matter.
The investigation, being conducted under the Prevention of Money Laundering Act (PMLA), follows a First Information Report (FIR) registered by the Central Bureau of Investigation (CBI) on August 31. Chandra had personally guaranteed both loan facilities.
An ED official confirmed that an Enforcement Case Information Report (ECIR), the agency's equivalent of an FIR, had been registered in the case. However, the official did not disclose further details of the investigation.
The development marks an escalation in the legal proceedings against Chandra, who is also facing personal insolvency proceedings involving claims worth more than ₹22,000 crore.
A spokesperson for Zee Entertainment Enterprises Limited said the company had been informed that an ECIR had been registered against Chandra in his personal capacity, following the ongoing CBI investigation into an earlier FIR.
The spokesperson clarified that the proceedings concerned Chandra and certain promoter entities and had no bearing on Zee Entertainment or its business operations.
CBI case and allegations against Chandra
In its FIR, the CBI named Chandra as the first accused, invoking provisions relating to criminal conspiracy, cheating and criminal breach of trust. The case also names several companies and their directors, besides other unidentified individuals.
The investigation stems from a complaint by LICHFL, which alleged that the loans were sanctioned on the basis of inflated and false net worth certificates submitted by Chandra as part of his personal guarantees.
The CBI is also examining allegations of misappropriation and misuse of the loan funds. According to the complaint, the alleged wrongdoing involved Chandra, the borrowing companies and their directors.
Following a request from the CBI, immigration authorities issued a look-out circular against Chandra at airports, seaports and land entry and exit points across the country to prevent him from leaving India.
The FIR also refers to allegations that the accused had publicly disclosed their intention to leave the country, prompting the lender to seek urgent action to trace the loan proceeds and assets.
Two loan facilities worth ₹980 crore
The alleged irregularities concern two loan facilities sanctioned by LICHFL in 2018 to four companies associated with the Essel Group.
The first facility, worth ₹500 crore, was extended to Vasant Sagar Properties Private Limited, with Pan India Infraprojects Private Limited acting as the co-borrower. The loan was intended for the takeover and top-up of a business expansion facility.
The second loan, amounting to ₹480 crore, was granted to Digital Subscriber Management and Consultancy Services Private Limited, with Spirit Infrapower and Multiventures Private Limited as the co-borrower. This facility was extended under a rental discounting arrangement.
A rental discounting facility, also known as lease rental discounting, allows a borrower to raise funds against the expected rental income from a property.
Both loan accounts subsequently defaulted. According to the CBI case, the outstanding amounts stood at approximately ₹570.50 crore in the Vasant Sagar account and ₹507.25 crore in the Digital Subscriber Management account.
LICHFL has pegged its total alleged wrongful loss at ₹1,322.39 crore.
Discrepancies in net worth declarations
A key aspect of the investigation concerns two net worth certificates submitted by Chandra in 2018 to provide personal guarantees for the loans.
For the ₹500 crore facility, a certificate submitted on March 28, 2018, stated that his net worth as of March 31, 2017, stood at ₹59,113 crore.
For the second loan of ₹480 crore, Chandra submitted another certificate on July 6, 2018, declaring his net worth at ₹40,562 crore.
However, the CBI's FIR points to a significant discrepancy between these declarations and statements subsequently made by Chandra during personal insolvency proceedings.
According to the agency, Chandra categorically denied having the net worth mentioned in the certificates that had been submitted to LICHFL for the approval and disbursal of the loans.
During the insolvency proceedings, he reportedly stated that his net worth in 2024 was ₹31.79 crore. He also maintained that even in 2017-18, his net worth had not exceeded ₹40,000 crore.
LICHFL has alleged that Chandra created false documents reflecting an inflated net worth to induce the lender into releasing funds to the principal borrowers.
The lender has further alleged that Chandra acted in collusion with the borrowing companies and their directors, leading to the alleged diversion and misappropriation of funds. The complaint also raises concerns about assets allegedly being stripped to frustrate recovery proceedings.
Insolvency proceedings and repayment plan controversy
The ED investigation comes amid a separate controversy surrounding Chandra's personal insolvency proceedings before the National Company Law Tribunal (NCLT).
LICHFL is among the creditors involved in the proceedings, in which the tribunal initially approved a repayment plan allowing Chandra to settle admitted claims of ₹22,006 crore by paying just ₹6.25 crore.
However, a five-member special bench of the NCLT subsequently stayed the order, bringing the repayment plan into question.
The decision had triggered objections from several lenders, including LIC Housing Finance, Canara Bank and Union Bank of India, which opposed the exceptionally low recovery proposed under the plan.
The creditors had also raised concerns about the approval process and the financial position presented during the insolvency proceedings.
The NCLT's intervention followed disagreements over the earlier order approving the repayment proposal. The five-member bench also restrained Chandra from selling, transferring or otherwise disposing of his properties, directly or indirectly, while the matter remained under consideration.
ED's wider focus on insolvency-related fraud
The latest investigation also comes against the backdrop of an internal directive issued by ED director Rahul Navin last month.
Navin had instructed the agency's teams to prioritise investigations into frauds involving insolvency proceedings, particularly cases involving disproportionately large haircuts through which promoters allegedly regain control of assets.
The ED had disclosed the directive in a statement. It came days after the controversy surrounding the NCLT's initial approval of Chandra's repayment plan.
With the registration of the ECIR, the agency will examine the money laundering angle arising from the alleged loan fraud, while the CBI continues its investigation into the underlying allegations of cheating, criminal conspiracy and breach of trust.