The Directorate of Enforcement (ED), Mumbai Zonal Office-I, has conducted search operations at 11 premises in Mumbai and Delhi as part of a money-laundering investigation involving Alfara’a Infraprojects Private Limited and its directors and close associates.
The searches were conducted on September 10, 2026, under the Prevention of Money Laundering Act, 2002.
According to an ED press release dated September 14, the investigation concerns credit facilities obtained from Bank of Baroda, the subsequent classification of the company’s account as a Non-Performing Asset and the alleged diversion of funds through multiple intermediary entities.
During the searches, the ED reported seizing ₹18 lakh in Indian currency, USD 9,567 and 860 Zambian kwacha. Fixed deposits denominated in Indian rupees, Japanese yen and US dollars were also frozen.
The agency stated that the investigation remains in progress. Its claims represent investigative allegations and should not be interpreted as final judicial findings against the company or the individuals concerned.
How the Investigation Began
The ED initiated its investigation on the basis of an FIR registered by the Central Bureau of Investigation’s Economic Offences Branch in Chennai.
The FIR was registered against Alfara’a Infraprojects Private Limited and others following a complaint filed by Bank of Baroda.
The company, referred to as AIPL in the press release, operated in the civil-construction sector. According to the ED, it obtained credit facilities of ₹103 crore from Bank of Baroda in 2012.
These facilities were subsequently enhanced to ₹360.50 crore in 2015.
The account was classified as a Non-Performing Asset on June 18, 2018, with an outstanding balance of ₹255.74 crore.
An account becoming an NPA does not automatically establish fraud or money laundering. Borrowers may default for several commercial or financial reasons. However, where investigators suspect that funds were diverted, layered or transferred outside the stated business purpose, an ordinary recovery matter can develop into a criminal and money-laundering investigation.
Letters of Credit Worth ₹75.02 Crore Devolved
One major part of the investigation concerns Letters of Credit worth approximately ₹75.02 crore that allegedly devolved.
A Letter of Credit is a banking instrument used to provide payment assurance in a commercial transaction. The issuing bank generally undertakes to make payment when the prescribed documents and conditions are satisfied.
When the applicant fails to meet its payment obligation, the liability may fall upon the issuing bank. This is commonly described as the Letter of Credit devolving.
The ED has alleged that the devolvement of these LCs contributed to the generation of proceeds of crime in the case.
Investigators are likely to examine whether the transactions represented genuine supplies, whether supporting documents were authentic and whether the beneficiaries had real commercial relationships with AIPL.
Invoices, purchase orders, transport documents, stock records, bank statements and tax filings may become crucial in determining whether the underlying transactions had legitimate business substance.
Bank Guarantees Worth ₹164.59 Crore Invoked
The ED also reported that Bank Guarantees worth approximately ₹164.59 crore were invoked.
A Bank Guarantee provides financial protection to a beneficiary if the applicant fails to perform an agreed contractual or payment obligation. When such a guarantee is invoked, the bank may be required to pay the beneficiary and subsequently recover the amount from its customer.
Large-scale invocation of guarantees can create substantial exposure for the issuing bank. It may also trigger scrutiny of the underlying contracts, the financial position disclosed by the borrower and the use of the facilities.
According to the press release, funds arising from the transactions were allegedly routed through beneficiary and intermediary entities and subsequently diverted to AIPL and its group companies.
The ED described these as layered transactions allegedly designed to conceal the funds’ actual origin.
The Alleged Layering of Funds
Layering refers to moving money through multiple transactions, accounts or entities to make its original source difficult to identify.
A layered financial trail may involve payments to vendors, transfers between related businesses, short-term loans, circular transactions, advances, refunds or transfers to entities with limited commercial operations.
Not every multi-entity transaction is improper. Construction groups commonly operate through subsidiaries, joint ventures, contractors and project-specific companies.
The regulatory concern arises when transactions lack a genuine commercial purpose, are unsupported by documents or result in funds returning to a connected party through an indirect route.
To establish the alleged trail, investigators may need to compare:
- Bank statements of AIPL and its group entities
- Details of intermediary and beneficiary companies
- Contracts, invoices and delivery records
- Beneficial ownership of recipient entities
- Accounting entries and statutory filings
- Communications between directors and intermediaries
- The ultimate use of transferred funds
The strength of the case will depend on whether the financial records demonstrate genuine transactions or a deliberate structure used to disguise diverted money.
Overseas Remittances to Singapore and Hong Kong
The ED further alleged that foreign Bank Guarantees were opened for the purported export of glazed tiles.
According to the agency, the exports were never made, but funds were remitted to foreign entities located in Singapore and Hong Kong.
The press release stated that several of the associated Letters of Credit and Bank Guarantees later devolved or were invoked because of non-payment by AIPL, allegedly causing wrongful loss to the bank.
This aspect of the investigation may require authorities to examine customs records, shipping documents, export declarations, foreign-remittance instructions and communications with the overseas entities.
Where an export transaction is genuine, there should ordinarily be a consistent trail across commercial invoices, customs documentation, shipping records, banking channels and accounting records.
Any mismatch between these records may raise questions about whether the export had commercial substance or was used to justify the movement of funds abroad.
Assets Seized and Fixed Deposits Frozen
During the search operations, the ED reported recovering and seizing:
- ₹18 lakh in Indian currency
- USD 9,567 in foreign currency
- 860 Zambian kwacha
The agency also froze fixed deposits of approximately:
- ₹1.02 crore
- JPY 1.75 crore
- USD 1,03,145
These amounts are denominated in different currencies and should not be combined without applying verified exchange rates for the relevant date.
Freezing a fixed deposit restricts its withdrawal or transfer during the investigation. It does not, by itself, constitute a final determination that the entire amount represents proceeds of crime.
The ED also seized documents, digital devices and records relating to bank transactions, Letters of Credit, Bank Guarantees and immovable properties allegedly connected with the accused persons and other suspect entities.
Why the PMLA Is Involved
The PMLA enables authorities to trace, identify, freeze and attach property suspected to be connected with proceeds generated through a scheduled offence.
In this matter, the CBI FIR forms the basis of the ED investigation. The agency is examining whether the alleged bank fraud generated proceeds of crime and whether those funds were concealed, possessed, transferred or presented as legitimate assets.
The investigation must establish a connection between the alleged criminal activity and the property under examination. Searches and freezing actions are investigative steps; final liability must be determined through the legal process.
The Larger Takeaway
The case demonstrates how weaknesses in credit monitoring, trade documentation and group-company transactions can create significant risks for lenders and borrowers.
Businesses using Letters of Credit and Bank Guarantees should maintain complete documentation for every underlying commercial transaction. Payments routed through intermediaries should have a clear business purpose, proper approval and an auditable financial trail.
Companies with overseas transactions must also ensure that banking records, customs filings, invoices and delivery documents remain consistent.
A facility that begins as legitimate working capital can become the subject of regulatory scrutiny if funds are used outside the sanctioned purpose or if supporting transactions cannot be substantiated.
Shunyatax Global Insights
Businesses facing financial stress should address banking irregularities early and maintain transparent communication with lenders. Attempting to conceal the movement of funds through unsupported group or intermediary transactions can substantially increase legal and regulatory exposure.
During an ED or banking investigation, companies should preserve records, reconcile transaction trails and ensure consistency across financial statements, tax returns, customs documents and bank submissions.
If you or your business is facing problems involving an ED investigation, bank fraud allegation, NPA account, Letters of Credit, Bank Guarantees or frozen assets, Shunyatax Global can provide professional guidance to help you move forward with clarity and confidence.
Contact Shunyatax Global
Phone: +91 94615 14198
Email: office@shunyatax.in
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Disclaimer: This article is based on the Directorate of Enforcement press release dated September 14, 2026. The investigation remains ongoing, and the matters described include allegations that have not resulted in final judicial findings. This content is intended for general information and does not constitute legal, tax or financial advice.