New Delhi

The Enforcement Directorate (ED) has broadened its investigation in the Cochin Minerals and Rutile Limited (CMRL) case *on the allegation that the firm had made* fictitious expenditure amounting to Rs 1.72 crores towards software services purportedly rendered by ex-Keralam Chief Minister Pinarayi Vijayan's daughter Veena and her firm Exalogic Solutions Pvt Ltd, despite "no services having actually been rendered".

ED's inputs shared before Kerala High Court also mention the findings allegedly unearthed during the search operation carried out in January 2019 by the Cochin Income Tax Department, in which it is alleged that CMRL had inflated its expenditure by booking fictitious cash expenses under the heads of "transportation and sludge handling, aggregating to Rs 133.82 crores during the financial years 2012-13 to 2018-19."

The IT Department concluded that such "inflated expenditure enabled the generation of unaccounted cash, which was subsequently utilised for making illegal payments to politicians, political parties, media houses and public servants."

The CMRL is a publicly listed company incorporated on August 18, 1989. Kerala State Industrial Development Corporation (KSIDC) holds approximately 13 per cent of the Company's shareholding, while public shareholders hold about 48.75 per cent.

During statements recorded before the Income Tax authorities, CMRL's Chief Financial Officer and its Managing Director also disclosed that "such payments had been made to ensure the smooth functioning of the company's business operations in the face of perceived threats of closure and environmental challenges."

The ED informed the court that it relied upon certain loose sheets allegedly seized from the residence of S Suresh Kumar, *the former* Chief Financial Officer of the CMRL, during the search proceedings, as well as statements recorded from him under Section 132(4) of the Income Tax Act and statements recorded from the Managing Director under the same provision.

According to the ED, "these materials substantiate the allegations regarding the aforesaid illegal payments."

Subsequent to the searches conducted on January 25, 2019, the Income Tax Department quantified the total of such bogus expenditure allegedly utilised for cash payments at Rs 135.54 crore for Assessment Years 2013-14 to 2019-20, i.e. Financial Years 2012-13 to 2018-19.

The CMRL then approached the Income Tax Settlement Commission and quantified the inflated expenses at Rs 134.27 crore. They claimed that the payment of Rs 1.72 crore towards software services was a genuine payment. Further, out of the Rs 134.27 crore, quantified by the Company herein as inflated expenses, CMRL pleaded that a sum of Rs 73.38 crore be allowed as eligible expenses incurred for business purposes and offered the balance amount of Rs 57.78 crore as additional income.

The Settlement Commission, by order dated June 12, 2023, upheld the findings of the Income Tax Department with respect to inflation of expenses, generation of cash for illegal payments, and fictitious payment of Rs 1.72 crore to Veena Vijayan and her company, Exalogic Solutions Pvt. Ltd., without rendering of services.

However, the Interim Board for Settlement, as part of the settlement, allowed 70 per cent of the amount of Rs 73.38 crore claimed as eligible expenditure and disallowed the remaining 30 per cent.

Since CMRL is a publicly listed company in which a substantial portion of the shareholding is held by public investors and Kerala State Industrial Development Corporation (KSIDC), the ED said, the alleged diversion of company funds through illegal payments, including payments allegedly made without any legitimate business nexus to Exalogic Solutions Private Limited and others, resulted in financial loss to the shareholders.

According to the ED, "such diversion diminished the profits available for distribution to the shareholders and amounted to dishonest or fraudulent removal and concealment of company funds, attracting Section 447 of the Companies Act, 2013, the same being a scheduled offence."

"The shareholders of the CMRL are victims of offences involving cheating, criminal conspiracy, and dishonest or fraudulent removal or concealment of property, allegedly committed by the Company and its Directors," it said.

As per the ED, such acts disclose cognizable offences under the various provisions of the Indian Penal Code, 1860.

Pursuant to the order of the Ministry of Corporate Affairs dated January 12, 2024, under Section 210(1)(c) of the Companies Act, an investigation was also initiated in the case, which was subsequently followed by an order under Section 212 entrusting the investigation to the Serious Fraud Investigation Office (SFIO).

"The criminal acts resulted in the generation of "proceeds of crime" in the hands of the recipients, including Exalogic Solutions Private Limited and others, through the commission of scheduled offences, and that such aspects were the subject matter of inquiry and investigation by the ED under the PMLA," ED informed the court.

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The ED also stated that a reference under Section 66(2) of the PMLA had been forwarded to the Kerala Police for registration of a criminal case in respect of offences punishable under Sections 120B, 411, 420, 421 and 424 of the Indian Penal Code, 1860.

The SFIO had filed a complaint on April 3, 2025, alleging commission of offences under the Companies Act, 2013, and the charges referred therein, which include an offence under Section 447 of the Companies Act, constitutes scheduled offences under the PMLA.